Life, Health, Annuities - Insurance

Life Insurance

Life insurance is designed to protect against the risk of premature death. The financial risks associated with premature death include: Final expenses, Burial, Funeral, Family and dependents' continued income, and Business income.

The 12 Exemptions to needing written consent to release P.I.I.

Listed below are the 12 exemptions upon which an individual's written consent is not required in order to release personally identifiable information: -On a "need to know" basis within an agency -Disclosures required by the Freedom of Information Act -For routine uses within an agency -For the Bureau of the Census to perform a census or survey -If used strictly for statistical research or reporting record -To the National Archives and Records Administration as a record which has sufficient historical or other value -A request made by law enforcement -For circumstances affecting the health or safety of an individual -To Congress -To a general accounting office -Court-ordered -To a consumer reporting agency (debt collection)

Name the 8 Classifications of Risk

"Double F, Double S, Double P, ND." Financial, Fundamental, Speculative, Static, Particular, Pure Nonfinancial, Dynamic.

Excess Interest Provision

"Excess Interest" is a provision stating that when a life insurance policy's interest rate becomes GREATER than the assumed interest rate, the policy will build excess cash value. The insurer will provide options for paying the excess cash to the insured via cash dividends or paid-up additions.

An individual can contribute the maximum amount to a Roth IRA if their annual income is below ______________. For a married couple filing jointly, the maximum annual income is _______________. Contributions to a Roth IRA are not permitted if annual income exceeds the upper limit. Individuals or married couples whose annual earnings surpass a certain amount are ineligible for Roth IRAs.

$120,000 ; $189,000

There is a maximum amount of earnings that can be subject to Social Security tax each year. Currently (2019), the maximum taxable wage base is $___________________. This amount is indexed each year to the national average wage index. This maximum applies to employers, employees, and self-employed individuals.

$128,400 Therefore, an employed person earning at least $128,400 or more will pay no more than $7,960.80 in taxes under the current Social Security payroll tax of 6.2%. Medicare Part A taxes are not subject to a maximum taxable wage cap.

Committing any act considered an unfair method of competition or an unfair act or practice recognized by the Code may result in an administrative fine of (?) for each such act, up to (?) per act when determined to be a "willful" violation or committed with such frequency that it may be considered a "general business practice" of the person. Following issuance of a cease and desist order, a willful violation is punishable by a fine of (?).

$5,000 $10,000 $55,000

A maximum of ____________ may be contributed per year for individuals age 49 and below. The limit is _____________ for individuals age 50 and above, which includes a "catch-up" contribution of $1,000. These limits apply to Roth IRAs, as well.

$5,500 (age 49 and below) $6,500 (age 50 and up) However, if the individual or the individual's jointly-filed spouse does have an employer-sponsored retirement plan, the full contribution up to the annual limit is fully tax-deductible if an individual's modified AGI is $63,000 or less, or a married couple filing jointly has a modified AGI of $101,000 or less.

Supplemental Security Income (SSI)

(SSI) benefits are monthly income paid by Social Security to individuals: -With limited incomes, -Who are disabled or blind, or -Who are age 65 and older. SSI is different from Social Security benefits. It pays for an individual's: Food, Shelter, and Clothing needs.

Interest earned on traditional IRA contributions is _____________ until withdrawn. Some individuals can make tax-deductible contributions, but all ____________. If the individual or the individual's jointly filed spouse does not have a retirement plan maintained by their employer, the entire contribution may be ______________________ up to the __________________ , regardless of the individual's adjusted gross income (AGI).

(interest on contributions is) tax-deferred; withdrawals are taxed; deducted from taxable gross income (up to the) annual contribution limit;

DEFINED CONTRIBUTION PLAN VESTING (Employer Matching) For qualified defined contribution plans with voluntary employee contributions and matching employer contributions, the following vesting schedule options apply:

*3-year Cliff and 6-year Graded. 3-year CLIFF VESTING: employer contributions must be fully vested by the end of year 3. In years 1 and 2, employer contributions are 0% vested, but by the end of year 3 and in future years, employer contributions must be 100% vested. 6-year GRADED VESTING: after 2 years of service, employer contributions must be 20% vested. In each year thereafter, the percentage vested increases 20%, until employer contributions are 100% vested by the end of year 6 - Year 1: 0% vested Year 2: 20% vested Year 3: 40% vested Year 4: 60% vested Year 5: 80% vested Year 6+: 100% vested

The IRS has established two acceptable vesting schedules for QUALIFIED DEFINED BENEFIT PLANS:

*5-year Cliff and 7-Year Graded 5-year CLIFF VESTING: the employer's contributions must be completely vested after the employee has worked five years. This means that during years 1 through 4 employer contributions are 0% vested; however, by the end of year 5 and in future years, employer contributions must be 100% vested. 7-year GRADED VESTING: employer contributions must begin vesting after the employee has worked three years in an amount of 20%. Each year thereafter, the plan must vest 20% until employer contributions are completely vested after the employee has worked seven years. This means that in years 1 and 2 employer contributions are 0% vested. In the following years employer contributions are vested in increasing increments of 20%, until they are 100% vested, occurring after 7 years of employment: Year 1: 0% vested Year 2: 0% vested Year 3: 20% vested Year 4: 40% vested Year 5: 60% vested Year 6: 80% vested Year 7+: 100% vested

Disability Income Provisions

*Probationary Period Occurs from the policy effective date and extends for a period of time, such as 15 or 30 days. The waiting period for accidents may be different than for sickness. During the probationary period, benefits are not payable for sickness, but usually are payable for accidents. The purpose of the probationary period is to prevent the insurer from "buying a claim" - when an individual purchases a disability income policy when already sick. *Elimination Period The elimination period is a "time deductible," specifying a period of time beginning immediately upon a disability when benefits are not payable. The elimination period is considered a time deductible instead of a dollar deductible because it is a period of time the insured must be disabled before the policy begins to pay benefits. Elimination Period = Time Deductible Elimination periods range from 30 to 180 days or more. Policies with longer elimination periods have lower premiums because the insurer is not paying benefits for as long a period as if benefits had begun immediately. The purpose of the elimination period is to prevent the insurer from paying short-term disabilities. If an individual, who has already qualified for disability benefits and satisfied the elimination period, returns to work and suffers another disabling event that is unrelated to the first disability, he or she will have to satisfy a new elimination period in order to receive disability benefits for the second disability. *Benefit Period The benefit period is a period of time disability income benefits will be paid to the insured after the elimination period is fulfilled. Benefit periods may be one year, two years, five years, or until the insured reaches the age of 65 (retirement age). Longer benefit periods require higher premium payments. Longer Benefit Periods = Higher Premiums *Income Benefits (Monthly Indemnity) Disability income benefits are paid periodically, such as monthly. The insurance company may not pay a disability benefit any less frequently than monthly. The amount of the income benefit is based on a portion of the insured's earned income. *Delayed Disability The delayed disability provision allows a stated period of time to lapse after an accident before the onset of a disability, after which period the insured is still eligible for benefits. This stated period may be 30, 60, or 90 days. *Presumptive Disability Presumptive disability is a condition in a disability income policy that permits the insured to be automatically eligible for total disability income benefits, regardless of their ability to work. Examples of presumptive disability include: Loss of vision in both eyes, Loss of use or dismemberment in any two limbs, or Complete loss of hearing or speech.

Premiums from life insurance and annuities are invested to earn interest. Fixed life insurance policies and fixed annuities earn a ________ rate of interest.

*constant rate of interest, thereby providing a guaranteed minimum of benefits. The cash value in fixed policies is guaranteed.

Variable life insurance policies and variable annuities earn a ___________________ rate of interest.

*fluctuating rate of interest. Insurers selling variable products must have at least one separate account for investing premiums of variable policies. The cash value in variable contracts cannot be guaranteed. The insured chooses where he or she wants the policy cash values invested in the securities market, thereby bearing the risk of account ups and downs.

It is illegal to do any of the following:

- Refuse to insure or to limit the amount of coverage offered to an individual solely because of the individual's sex, marital status, race, religion, or national origin; - Refuse to insure solely because another insurer has refused to write a policy or has cancelled an existing policy on that person; - Terminate or modify coverage or refuse to renew coverage solely because the applicant or insured is mentally or physically impaired; - Discriminate against victims of domestic violence.

Insurable Interest in life insurance policies is present in the following:

- The purchaser is also the person insured (It's for ME) - Marriage or blood relationship (They're family so they matter to me) - Business Partners (I depend on them) - Creditor-Debtor relationship (He owes me so....)

The primary similarities between risk retention groups and risk purchasing groups include:

- The rules for membership within the group - The types of exposure the group is subject to - The coverage available.

When a fully insured dies, the survivors' benefits depend on the average lifetime earnings of the deceased. The benefits can be paid as follows:

-A lump sum death benefit of $255 (payable to spouse or children) -Widow or widower of insured - full benefits at 65 or older, or reduced benefits as early as 60 -Widow/widower of any age if taking care of the insured's child or children under the age of 16 or a disabled child -When the youngest child becomes of age, the benefits stop and won't resume until the surviving parent reaches age 60. The period during which the surviving spouse doesn't receive benefits from Social Security is called the blackout period. -Unmarried children under 18 (if attending elementary or secondary school full time) -Dependent parents age 62 or older

How do I enroll in a Medigap Policy?

-A person must have Parts A and B to purchase a Medigap policy. -Open enrollment for Medigap policies spans a six-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Part B. -Once the Medigap open enrollment period begins, it cannot be delayed or reinstated. -Coverage may not be denied based on a person's health status, claims experience, or pre-existing medical condition if an individual enrolls during the open enrollment period. -It is illegal to sell a person a Medigap policy if they already have Medicare Part C coverage. The only exception is if the individual is changing coverage to Original Medicare. If an individual's Medigap policy provides prescription drug coverage, then the individual cannot also have a Part D plan.

Certain Riders modify the death benefit amount on a policy. These include:

-Accidental Death Benefit Rider or Multiple Indemnity -Accidental Death and Dismemberment Rider (AD&D) -Guaranteed Insurability Rider (GIR) -Cost of Living Adjustment (COLA) Rider -Return of Premium Rider -Return of Cash Value Rider -Term Rider -Annuity Rider

The interest is not taxable as long as the withdrawal is a "qualified distribution." These include:

-After five years, if the account owner dies or becomes disabled -Up to $10,000 for first-time home buyers -After the age of 59½

The following are risk factors that are considered when underwriting life insurance:

-Age -Gender -Lifestyle -Smoking -Hobbies -Hazardous Occupations -Medical History -Family Health History -Aviation

High Retention comes from follow up communication

-Are you satisfied with your purchase?

To be eligible for SSI benefits, an individual must meet all of the following:

-Be a U.S. citizen, national, or eligible non-citizen; -Be a U.S. resident or a resident of the Northern Mariana Islands; Residents of Puerto Rico, Guam, American Samoa or the U. S. Virgin Islands are generally ineligible for SSI benefits; and -Must not leave the U.S. for more than one calendar month or 30 consecutive days.

In order for a retirement plan to be qualified, it must meet the following IRS requirements:

-Be approved by the IRS -Be established for the exclusive benefit of the employees and/or their beneficiaries -Cannot discriminate in favor of highly-paid employees, officers, or stockholders -Be in writing and communicated to the employees in writing -Explicitly define the plan's contributions or benefits -Be permanent -Meet vesting and benefit requirements

What are the distinctive features of a PPO?

-Broad Service Area -Broad selection of Service Providers -No Primary Care Physician Used as a "Gatekeeper" or Mandatory Referral Requirements -Emergency Services Exempt from Preferred Providers' Requirement -PPO plans generally pay in full for emergency treatment regardless of where and by whom it is performed. -No Group-Owned Facility -Fee-for-service Pay Plan (unlike flat rate monthly plan for HMOs)

Health insurance policies are renewable according to five renewability classes:

-Cancellable, -Optionally renewable, -Conditionally renewable, -Guaranteed renewable, and -Non-cancellable.

Life with Guaranteed Minimum Payouts Many consumers do not like the idea of losing all or most of their investment in their annuity, if they were to die after receiving a few payments. Insurance companies offer alternatives to the pure life payout that provide guaranteed minimum payouts. These include:

-Cash Refund Option the annuitant will receive income for life, and upon the annuitant's death, the beneficiary will receive the balance of annuity funds. -Installment Refund Option Also pays the annuitant income for life, but upon the annuitant's death the beneficiary will receive the balance of annuity funds, equal to the remaining funds in the annuity, paid in installments. -Life with Period Certain Option provides the annuitant with guaranteed income for life and further guarantees annuity payments for a minimum number of years, such as 10 or 20.

Insurers are in the business of selecting good risks that will not jeopardize the financial stability of the company. Insurers use discrimination to determine good risks. However, insurers cannot unfairly discriminate against individuals who are part of the same risk class and have the same life expectancy in any policy condition or coverage. If an underwriter determines that the risk does not meet the criteria for at least standard issue, the company may:

-Choose to decline to accept the risk, -Issue the policy with an exclusion rider, or -Issue the policy with a higher than standard premium.

Distributions from an IRA may occur for the following:

-Death or disability without penalty -Retirement after age 59½ -First time home-buyers up to $10,000 without penalty, but with taxes -Education - no dollar maximum - without penalty, but with taxes -Catastrophic medical expenses, without penalty, but with taxes -An owner of a traditional IRA MUST begin receiving payments by April 1st of the year following the year they become 70½.

Agents should:

-Determine whether the applicant understands the questions asked on the application, -Verify if the statements given are being misrepresented and -Verify if any information has been concealed.

Nonqualified plans are characterized by the following:

-Do not need to be approved by the IRS -Can discriminate in favor of certain employees -Contributions are not tax-deductible -Interest earned on contributions is tax-deferred until withdrawn upon retirement

Qualified plans have the following features:

-Employer's contributions are tax-deductible as a business expense. -Employee contributions are made with pretax dollars - contributions are not taxed until withdrawn. -Interest earned on contributions grows tax-deferred -Withdrawals/Distributions are taxed, both principal and interest, because neither the contributions nor interest were previously taxed

Under a group policy, if a member's coverage is terminated, the member and their dependents may convert their group coverage to individual whole life coverage.

-Evidence of insurability cannot be required upon conversion. -The individual whole life premiums will be determined based upon the insured's attained age, and the face amount will be the same as was provided under the group policy. -The premium is likely to be higher.

Per NAIC model, most group policies have the following provisions:

-Grace period of 31 days -2-year contestability period from the date the insured's coverage took effect -The entire contract consists of the policy and attached application -Individual employees or members are issued certificates of coverage under the master contract -Misstatement of age provision -Evidence of insurability must be provided if an eligible individual for coverage enrolls after the enrollment period -Conversion right -Insureds' statements in application are representations -Facility of payment

All group life coverages must meet the following in most states:

-Group life master contracts must cover at least 10 individuals. In some states, this minimum is lower; -The group life contract must be established by an eligible group, such as an employer or an association; -The group life coverage must be established for the benefit of the insured individuals; -Individuals applying for coverage do not have to undergo a medical examination; -Premium rates are based on the claims experience of the entire group, not each individual, and the master contract holder must pay for at least a portion of the premiums, but is permitted to pay the entire cost of premiums.

The special benefits of section 529 plans include:

-Income tax breaks; -State tax breaks; -Funds may be reclaimed by the plan owner at any time and for any purpose; and -The amount of deposit is large - up to $300,000 for each plan beneficiary.

Group life insurance is a way to provide life insurance to many people under one policy.

-Individuals are not issued their own policy; instead, a master policy is issued to the organization sponsoring the insurance. -Each individual member of the group is issued a certificate of insurance. -Group life insurance must be issued to all members under nondiscriminatory rules. -Each individual is issued the same amount of coverage and at the same rate. -Members have the right to convert group life insurance to individual coverage upon leaving the group. -Group Insurance provides a mechanism for reducing administrative costs.

When can an individual enroll into, drop, or change Part C plans?

-Initial Enrollment Period (IEP) - The initial Medicare enrollment period is for a 7 months period that begins 3 months before the month you turn 65 years old, and the three months after your 65th birthday. Coverage begins the first day of the month after you enroll. If you signup in one of the months before your 65th birthday, coverage begins on the first day of the month you turn 65. -General (Annual) Enrollment Period (AEP) - The annual enrollment period is October 15th through December 7th annually. Coverage begins on January 1st the following year. -Special Enrollment Period (SEP)- The SEP varies depending on the situation.

Unfair or Improper Claims Practices

-Knowingly misrepresenting to claimants pertinent facts relating to coverages; -Failing to acknowledge with reasonable promptness communications regarding claims; -Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and filed; -Failing to adopt reasonable standards for prompt investigation and settlement of claims; -Not attempting in good faith to effect prompt, fair, and equitable settlement of claims; -Offering to settle claims for an amount less than the amount otherwise reasonably due or payable; -Delaying the investigation or payment of a claim by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; -Threatening a client in order to discourage their effort to recover a loss; -Trying to reduce a claim by having a policy of appealing arbitration awards that are in favor of insureds; -Any other practice which constitutes an unreasonable delay in paying or an unreasonable failure to pay or settle claims in full.

Whoever is engaged in the business of insurance whose activities affect interstate commerce will be punished if they:

-Knowingly, with the intent to deceive, makes any false material statement or report, or -Overvalues land, property or security in connection with any financial reports or documents presented to any insurance regulatory official or agency to examine the affairs of such person, and for the purpose of influencing the actions of such official, agency, or examiner.

There are three situations where the insurance company has the right to contest or void a policy:

-Lack of insurable interest - if there was not an insurable interest at policy outset, the insurer may contest the policy at any time. -Impersonation - if the applicant for a life policy is not the person who signs the application or undergoes the medical exam, the insurer may contest the policy and the death claim. -Murder - if the applicant is shown to have applied for a life insurance policy with the intent on murdering the insured, the insurer may contest the policy and the death claim.

HIPAA mandates several benefits for group health. These include:

-Maternity is not a pre-existing condition. Insurers of group health policies must treat maternity like any other sickness or accident. -HIPAA requires that hospital stay benefits be provided to mothers for 48 hours after a normal vaginal delivery and 96 hours after a cesarean delivery. -Mental illnesses must be covered on the same basis as physical illnesses (mental health parity).

How do I know if Medicare is the Primary or Secondary Payor of benefits?

-Medicare is primary if the individual is retired. -Medicare is secondary if the individual is currently employed and insured under his or her own or their spouse's employer coverage. -Medicare is secondary for the first 30 months (2.5 years) an individual has ESRD (kidney failure). -Medicare is secondary to no-fault insurance, liability, lung benefits, and Workers' Compensation.

Disability benefits include:

-Monthly payments to the disabled worker in the amount of the worker's PIA. At the earliest, the disabled worker may be eligible to receive Social Security disability benefits upon the sixth month of disability. -Monthly payments to the disabled worker's spouse, if the spouse is caring for a child under the age of 16, or a disabled child under the age of 22 in the amount of ½ of the worker's PIA. -Monthly payments to an unmarried child under age 18 (19 if the child is a full-time high school student), or a child who became disabled before the age of 22 in the amount of ½ the worker's PIA.

Once the cash surrender value is exercised:

-No death benefit will be paid, -The policy cannot be reinstated, -Any outstanding policy loans plus interest would be deducted from the cash surrender value, and -A surrender fee is charged at the time of cash surrender.

What are the Drawbacks of Term Life Insurance?

-No living benefits -As a long-term life insurance tool, term insurance can be increasingly expensive. Each time a term policy is renewed, the premium increases. Term renewals use the attained age of the insured to assess mortality, not the original age at policy application. As a person ages, the likelihood of death is greater, and term insurance accounts for this by increasing premiums. -If term insurance must be discarded due to expense or the insured has surpassed the maximum age limit, then the insured may be left without any life insurance protection when it is needed most.

HIPAA requires that insurers guarantee renewability of individual health insurance policies except for:

-Nonpayment of premiums, -Violation of plan terms or conditions, -Termination of coverage, or -Fraud.

What can I do to ensure that a policy will not be delayed?

-Observe and collect all signatures The agent and the applicant are required to sign the application. If the applicant is someone other than the proposed insured, except for a minor child, the proposed insured must also sign the application (in some states once a minor reaches the age of 15, the minor is eligible to contract for a life or health insurance policy). It is important for the agent to be present to witness any and all signatures. Both the agent and the applicant must sign disclosure forms and additional questionnaires that the applicant must complete. If automatic checking account drafts will be used for premium payment, the applicant must sign agreeing to such. -Make no omissions or errors If an agent notices a minor error on the application, the producer should correct the information in the presence of the applicant and have the applicant initial the change. Changes should be struck through, not erased. If the agent notices a major error on the application, the agent should start a new application for the prospective insured and safely dispose of the previous application. If an agent notices that the application is incomplete, the agent should have the applicant fill in the incomplete sections and then submit the application to the insurer. If the insurer approves an incomplete application, then the insurer has waived its right and is legally estopped from reasserting the right. - Collect Initial Premium The agent issues the applicant a premium receipt upon collecting the initial premium. There are two types of premium receipts that determine when coverage will begin: Conditional receipts and Binding receipts.

The main purposes of the MIB include:

-Preventing misrepresentation and fraud, -Providing insurers with tools to assess risk and -Holding down the cost of life insurance.

There are four types of MSPs:

-Qualified Medicare Beneficiary (QMB) Program: helps pay for Part A and Part B premiums and deductibles, coinsurance, and copayments -Specified Low-Income Medicare Beneficiary (SLMB) Program: helps pay Part B premiums only -Qualifying Individual (QI) Program: helps pay for Part B premiums only -Qualified Disabled and Working Individuals (QDWI) Program: helps pay Part A premiums only To be eligible for Medicare Savings Programs, a beneficiary must have Medicare Part A and have monthly income and resources below the listed amounts. Monthly Income Limits: QMB: $1,001/individual; $1,348/married filing jointly SLMB: $1,197/individual; $1,613/married filing jointly QI: $1,345/individual; $1,813/married filing jointly QDWI: $3,962/individual; $5,329/married filing jointly

The 3 Most Important Principles of Insurance Are

-Risk Pooling -The law of large numbers -Insurable interest

Common nonqualified plans for retirement include:

-Split dollar plans, -Deferred compensation, and -Executive bonus plans.

There are two kinds of war or military service exclusions:

-Status clause - the insurer will not pay the claim if the insured dies while in active military service. -Results clause - the insurer will not pay the claim if the insured dies due to an act of war. The war or military service clause is only in effect during wartime.

The three basic types of whole life insurance are:

-Straight whole life, -Limited payment whole life, and -Single premium whole life. Each type is based on how the premium is paid.

Major medical plans pick up where base plans leave off. There are two ways major medical plans do this:

-Supplemental plan -Comprehensive stand-alone plan

Grandfathered health care plans may continue in an exempt status until one of the following plan changes occurs, though subject to final regulations, which are expected in 2011:

-Switch of carriers by a fully-insured plan; -Elimination of certain benefits to treat or diagnose a particular condition that is currently covered; -Any increase in coinsurance percentage; -Certain increases of copayments, deductibles or out-of-pocket minimums; -Certain decreases in employer contribution rate; -Changes to overall annual limitations; -Certain mergers, acquisitions and/or employee transfer from a grandfathered plan.

Distributions from a QUALIFIED retirement plan may be made regardless of the following:

-The age when an employee retires, -The employee ceases employment, or -The plan is terminated.

When soliciting insurance policies to seniors, insurance professionals must take care to follow specific regulations. Such as?

-The agent must provide a full explanation of the policy benefits on a company approved form or other approved format. -The agent must fully explain any overlapping coverage that the policy being discussed might create. -The agent must have the prospective insured sign a statement acknowledging that the required information and disclosures were provided.

Convertible term allows term life policyowners to convert their term insurance into permanent policies without showing proof of insurability.

-The conversion option must be specifically noted in the contract, including the terms and conditions upon which it can be exercised. -When an insured converts their term policy, the permanent policy's premiums will be based on the insured's attained age or original age. -The attained age is the insured's age upon conversion. -The original, or issue age, is the age of the insured upon purchase of the term policy. -Depending on the terms of the conversion option, the policyowner may choose which age to use. -Most policies use the attained age upon conversion. -If the original age is used, the premiums will be lower than if the attained age is used. -Regardless, premiums under the converted policy will be higher than under the term coverage because the insured is older, and permanent life insurance policies are more expensive than term policies.

Social Security does not pay partial disability or short-term disability benefits. The disability must be total and the following must be met:

-The covered worker cannot do the work they did prior to the disability; -The covered worker cannot do other work because of physical or mental conditions; and -The disability has already lasted or will last for at least 12 full months, or the disability is expected to result in death. -The Individual must be fully insured and disability insured at the time of disability with at least 6 quarters of coverage or 10 years of work. Up to four quarters can be earned in one year.

Social Security disability benefits are only available prior to the age of 65. Social Security does not pay partial disability or short-term disability benefits. The disability must be total and the following conditions must be met:

-The covered worker cannot do the work they did prior to the disability; -The covered worker cannot do other work because of physical or mental conditions; and -The disability has already lasted or will last for at least 12 full months, or the disability is expected to result in death.

A Policy Summary must include

-The name and address of the insurer, -The name and address of the agent, -The policy's generic name, -A list of all the policy riders, -Premiums, -Dividends, -Benefits, -Cost indexes, -Cash surrender values, and -Policy loan interest rates. The policyowner must be provided with the policy summary at the time of policy delivery.

However, distributions made for the following reasons are not subject to the early distribution penalty tax:

-The plan participant dies or incurs a disability -A loan is taken from the plan -Distribution made as part of a divorce decree -Level payments made at least annually to the participant over their life -Distribution made as a qualified rollover Example: Tom has a qualified plan in which he must withdraw $3,000 per month upon reaching age 70½. The penalty amount for a $2,000 withdrawal is half of the difference between the amount withdrawn and the required amount. $3,000 - $2,000 = $1,000 $1,000 ÷ 2 = $500 Tom's penalty is $500.

LTC premiums are based on several factors.

-The younger an applicant is upon purchase, the lower the premium. -Policies with longer elimination periods have lower premiums. -Policies with longer benefit periods have higher premiums. -An applicant who has difficulty performing some ADLs upon application will have a higher premium. -Loss ratios must be at least 60% for individual LTC policies.

Section 529 College Savings Plan

-allows tax benefits for parents who set aside money for their children's future college expenses -available to all parents, regardless of income The section 529 plan is a tax-advantaged savings plan to fund higher education costs. In most cases, interest is not subject to federal tax. In some states, interest earned in 529 plans is exempt from state income tax, as well. Contributions are NOT FEDERALLY tax-deductible, but some states may allow the contributor to deduct all or part of the STATE income tax. Distributions used for college costs are tax-free.

As explained under conditional receipt, coverage is not effective without:

-collection of the initial premium, -Approval of the application, and -Policy issuance and delivery. In some cases, the insurer requires the agent to collect a statement of good health from the insured at the time of delivery.

In life insurance the insurance company agrees to pay...

... a predetermined amount - the face amount, in exchange for consideration (premium).

If the applicant accepts the counter-offer, agreement occurs. However, if the applicant refuses the modified terms of the policy, there is no contract and the insurance company will return any initial premium paid. Acceptance occurs when...

... the policy is issued.

Contract law defines a contract as...

...a legally binding agreement between two or more parties where a promise of benefits is exchanged for valuable consideration.

The residual disability benefit differs from the partial disability benefit in that benefits are paid for...

...a longer period of time, in some cases until the insured reaches the age of 65.

Legal competence means that...

...all parties must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol. The insurer must be legally authorized to sell insurance in the state, and the agent, if any, must also be licensed in that state.

All insurance contracts are conditional. This means...

...all parties to the contract must meet certain conditions when a loss occurs in order for the contract to be legally enforceable. An example of a condition in a life insurance contract is submitting the insured's death certificate to the insurance company for payment of the death benefit. Conditional contracts can be thought of as "if-then" contracts: if a loss occurs, then the insurance company will pay benefits.

An agreement must have both...

...an offer and an acceptance. Agreement occurs when a definite, unqualified offer is proposed by one party and accepted by another. The applicant makes an offer to the insurance company when he or she submits the completed application with the initial premium to the insurance company. If the insurance company's underwriter approves the application as it was applied for, the insurance company has accepted the offer. If the applicant submits the application to the insurer without the initial premium, the applicant is inviting the insurance company to make an offer. In this case, the insurer makes an offer to the applicant by issuing the policy with a premium invoice. If the applicant pays the initial premium, the applicant has accepted the offer.

Individuals who indicate on their life insurance application that they are commercial or private pilots will be asked to complete an...

...aviation questionnaire. The purpose of the questionnaire is to provide the insurer with information regarding the individual's piloting schedule and FAA ratings before making a decision on what policy restrictions to apply.

If the insurance company receives the application and initial premium, but issues the policy with modified coverage or premium, the insurance company has made a...

...counter-offer.

A spousal IRA may be established for a married spouse who doesn't work. This would allow a married couple to ...

...double their annual individual contribution limit and double the tax-deductible contribution if the working spouse does not have an employer-sponsored retirement plan.

Under STOLI arrangements, the insured is usually a person who is...

...either ELDERLY (typically ages 65 to 85) or TERMINALLY ILL. STOLI arrangements are used to make a profit on these individuals who are near death. In a sense, it is gambling on a person's life because the stranger or investor is betting the insured will die before they pay out a lot of money in premiums.

Reasonable Expectations An insured can reasonably expect that the insurer will provide coverage as indicated in the insurance policy, even if...

...every detail regarding the coverage is not stated. Example: If roadside assistance is provided in an automobile policy, it is reasonable for the insured to expect that the insurer will cover the cost of changing a flat tire.

The purpose of an insurance policy is to...

...indemnify (make whole) the insured when a covered loss occurs.

A Guaranty Association can't be used to...

...induce a sale of insurance or annuities.

Representations are statements made by the...

...insured, to the best of their knowledge. The insured's statements made in the application are held to the principle of representations because they are not guaranteed to be true. As long as the insured's statements are made in good faith, any statements the insurer deems misrepresentations must be shown to be material to the risk in order to void the policy. Material to the risk means information that is fundamental to insuring a risk. If the insurer discovers a misrepresentation that affects whether or not the policy would have been issued, the misrepresentation is said to be material. Representation = Believes true

Misrepresentations are...

...intentional misstatements made by the insured. Misrepresentations must be intentional and material to the risk in order for the insurer to void the contract. Misrepresentation occurs when an insured lies on a health insurance application by stating that they do not have a medical history of headaches, when in fact, they do.

Fraud

...is an intentional misrepresentation or concealment of material fact to cheat another party for economic gain

Most insurance is considered a personal contract. This means...

...it's a contract between an individual and the insurer. Personal contracts normally cannot be transferred to another individual without the insurer's written consent.

The comparative interest rate method calculates an interest rate that ...

...must be earned in a side fund of a buy term and invest the difference, in order for the value of the side fund to be equivalent to the surrender value of the policy that has the higher premium at a specific time. This interest rate is called the comparative interest rate or CIR. As the CIR increases, the policy with the higher premium is actually lower in cost compared to the lower-premium policy.

An IRA transfer occurs when IRA funds are moved from...

...one trustee/custodian to another, such as transferring funds from one bank to another.

Since mutual insurers issue dividends to their policyholders, they are referred to as...

...participating insurers.

Life insurance is not considered a personal contract because a...

...policyowner has no stake in the risk assumed by the insurance company. A policyowner has ownership of their life insurance contract and can give it away (a process called assignment), if they so choose.

Needs Approach The needs approach calculates...

...the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities. The needs approach may be more appropriate for families with two income earners.

Unfair discrimination includes discrimination against ...

...the blind and the physically or mentally impaired, or based on sexual orientation.

The human life value approach determines the amount of life insurance coverage needed based on...

...the financial loss a family would experience if a wage earner died. The human life value approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual. The calculation uses the following factors to determine an individual's human life value: The insured's age, Net annual salary, Number of remaining working years, Annual expenses, and The rate at which the dollar depreciates.

In health insurance the insurance company agrees to pay...

...the insured's medical bills or disability income while the insured cannot work because of disability, in exchange for consideration (premium).

All insurance contracts are aleatory contracts. This means...

...there is an unequal exchange of value. Insurance contracts are aleatory contracts because payment of benefits is contingent upon the occurrence of an uncertain loss. One party has the potential to receive more benefit than the other. An example of this is the payout of a life insurance policy for a young healthy person who unexpectedly dies prematurely.

All insurance contracts are contracts of adhesion. This means...

...there is only one author. The applicant does not write any part of the insurance contract. Therefore, insurance companies must adhere to the insurance policy. Insurance contracts are often referred to as "take it or leave it" contracts because the insurance company writes the insurance contract, to which the insured must adhere.

Warranties are statements that are guaranteed to be...

...true and are part of the legal contract. Insurers are held to the principle of warranties. Breach of warranty is grounds for voiding an insurance contract.

John is required to make a $5,000 distribution from his traditional IRA. If he only makes a $3,000 distribution, how much will he be penalized? Select one: a. $500 b. $1,000 c. $2,000 d. $5,000

1,000. Could be penalized 50% of the remaining amount that should have been distributed at the required age.

Underwriters seek to answer two big questions when deciding whether to issue an insurance policy:

1. Is the applicant insurable? 2. Does the applicant have an insurable interest in the insured?

The Commissioner has the following powers and duties:

1. Supervision of all transactions relating to the organization or reorganization of insurance companies organized under the laws of Connecticut. 2. Supervision over the sale of all stock certificates, bonds or other evidences of interest or indebtedness issued by companies. 3. Supervision, control and regulation of corporations, companies, associations, societies, exchanges, partnerships, or persons authorized to transact the business of insurance in Connecticut. 4. The power to make all reasonable rules and regulations necessary to enforce the insurance laws of Connecticut.

Two ways are used to determine the amount of life insurance an individual needs:

1. The Human Life Value approach (as proposed by Dr. Solomon S. Heubner) 2. The Needs Approach.

In addition, the Medicare Part A payroll tax of ______% must be paid by both employees and employers. Self-employed individuals must pay the entire _________% Medicare Part A tax.

1.45% ; 2.9%

If withdrawals are not used for eligible college expenses, tax and a ____% federal penalty on the interest portion of the withdrawal applies. To avoid taxes and penalties, withdrawals must be made strictly for eligible college expenses. The plan is managed by an educational institution or by the state.

10%

However, if distributions from a QUALIFIED plan are made prior to the age of 59½, then a ______________ is imposed.

10% penalty tax

The main idea behind coordination of benefits is that the insured cannot be reimbursed or receive benefits totaling more than ______% of his/her loss.

100%, i.e., they can't profit off of a loss via insurance. There are provisions made for the claims payment process, so that when a person is insured under multiple health plans providing coverage for the same loss and make claims, there is defined method for determining which insurance company is the primary insurer and which insurance company is the secondary insurer.

Loss ratio is the proportion of losses incurred by an insurer with respect to the total dollar value of premiums received (total losses divided by total premiums). Expense ratio is the insurer's expenses divided by the total premiums received. If the sum of an insurer's loss and expense ratio is:

100%, then the insurer has broken-even. Greater than 100%, the insurer has a loss. Less than 100%, the insurer has a gain. Underwriters keenly analyze loss ratios to determine the renewability of insurance contracts and the adequacy of premiums.

Insurers may set limitations or exclusions for pre-existing conditions for up to ____ months. However, an insurance company may look back at least ____ months when considering pre-existing conditions for a late enrollee.

12 months; 18 months

Brian is insured under Medicare Part A and enters the hospital for surgery. Assuming he has not yet tapped into his lifetime reserve, what is the maximum number of days that Medicare will pay for his hospital bills? Select one: a. 120 days b. 150 days c. 60 days d. 90 days

150 days After an initial deductible is met, Medicare pays for all covered hospital charges for the first 60 days of hospitalization. The next 30 days are also covered, but the patient will be required to contribute a certain daily amount. If, after these first 90 days the patient is still hospitalized, they can tap into a lifetime reserve of an additional 60 days, paying a higher level of daily co-payments. Consequently, a patient who has not yet tapped into the lifetime reserve days could have up to 150 days of Medicare coverage for 1 hospital stay.

Complaints with HMOs must be settled within . ______ days of filing.

180 days

According to the Affordable Care Act, pre-existing conditions cannot be imposed on children under the age of: Select one: a. 26 b. 23 c. 21 d. 19

19 The ACA mandates that pre-existing conditions cannot be imposed on children under age 19

Rollovers are taxable at a _____% withholding rate, unless the plan participant deposits the funds into a new IRA or qualified plan within 60 days of receiving the funds from the prior IRA.

20%

24-hour Coverage Versus Limited/At Work Coverage

24-hour coverage is long-term disability coverage for disabilities that occur as a result of accident or sickness at any time of day, whether or not the insured is at work. 24-hour coverage may be offered as nonoccupational coverage only because Workers' Compensation specifically covers accident, sickness, and disability that occur WHILE on the job. Workers' Compensation provides limited at-work coverage only. Workers Compensation = At-work Coverage

What is the blood deductible? Select one: a. 3 pints under both Medicare Parts A and B b. 3 pints annually under Medicare Part A or Part B c. 3 pints biannually d. Medicare does not have a blood deductible.

3 pints annually under Medicare Part A or Part B The Medicare blood deductible is three pints per year. If the blood deductible is met under Part A, it does not need to be met under Part B.

SSDI Waiting Period There is a mandatory wait period that is applied to SSDI claims. You must be disabled for ____ months after your disability onset date before you can start receiving SSDI cash payments.

5 months wait! You will receive disability benefits starting at the beginning of the sixth month.

Partial disability benefits are usually ____% of the total disability benefits and are paid for up to _______ months.

50% ; 6 months Benefits are paid as a flat amount or residual amount. For the flat amount benefit, a specific amount is stated in the policy. Typically, the amount is 50% of the full disability benefit. For the residual amount benefit, the benefit is based on a PROPORTION OF THE INCOME LOST because of partial disability. Therefore, a person who can't work 20% of the time because of a partial disability would receive a 20% income benefit. Partial Disability = 50% for 6 Months

If someone's income is between $25,000 and $34,000, the individual will pay income tax on up to ______% of their Social Security benefits. If the individual's income is over $34,000, the individual will pay income tax on up to_____% of their Social Security benefits.

50% ; 85% Similarly, Joint filers will pay federal income tax on their Social Security benefits if their income is greater than $32,000. If the income of the joint return is between $32,000 and $44,000, the couple will pay income tax on up to 50% of their Social Security benefits. If the joint return has an income over $44,000, the couple will pay income tax on up to 85% of their Social Security benefits.

501(c)(9) Trusts

501(c)(9) trusts can be used by charitable organizations to fund employee health benefit plans. Unlike traditional self-funded plans, contributions to a 501(c)(9) trust are immediately tax deductible, and earnings grow tax-deferred.

Social Security payroll taxes are collected from employers, employees, and self-employed individuals. The Social Security payroll tax for employees is _____%_. Employers must pay a matching _______% Social Security tax. Self-employed individuals pay both taxes for a total of ________%.

6.2% ; 6.2% ; 12.4%

The legal action provision places a limit on the period in which a claimant can file suit against an insurer. In most states, legal action against an insurer cannot be taken until ____________, and not after ___________ years.

60 days have passed since the insurer received proof of loss and within two years from the date proof of loss was submitted to the insurer.

Group disability income policies are usually short-term disability policies. The benefit amount is _____%--_____% of the insured's income and benefits are generally paid on a weekly basis. Benefits can be stated as a flat amount, such as $300 weekly, or as a percent of income such as 66 2/3% of base salary.

60% -- 80%

Social Security disability benefits are only available prior to the age of ____.

65

If a covered worker retires at the normal retirement age (65), they will receive 100% of the PIA. However, if a covered worker retires early at the age of 62, the maximum Social Security benefit is ____% of the PIA.

80%

Participating life insurance policies (par) =

= Pay Dividends to Policyholders

Nonparticipating life insurance policies (nonpar) =

= pay dividends to shareholders, not policyholders.

Qualified rollover

?

Health Maintenance Organizations (HMOs)

A Health Maintenance Organization (HMOs), also called a Health Insurance Organization or HIC in some states) is a managed health care plan in which... ***a group of medical providers contracts with a group to provide medical care for its members at prices both agree to and that are lower than the costs of traditional insurance*** The HMO is the original model in Managed Health Care. The HMO owns or contracts with a clinic and staffs it. It subcontracts with a hospital. Each member of the HMO pays a specified monthly flat fee for membership. Members may use only the group facilities and primary care providers (PCPs). Only the PCP can refer a patient to a specialist or hospital. The HMO provides free preventative medical care (annual physical exams and routine well-child visits, immunizations, age related preventative treatment, etc.) in an effort to identify and treat problems early, thus promoting health and saving money.

Keogh Plan

A Keogh plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are set as defined contribution

Reduction in Coverage (as a Condition of a Policy)

A Reduction in Coverage provision lays out the terms and conditions under which the amount of coverage under the policy can be reduced. Reduction in Coverage provision must be clearly labeled in the policy.

What qualified retirement plan is a combination of an IRA and profit sharing plan, permitting the employer to tax-deduct up to 25% of contributions made to employees? Select one: a. SEP b. 403(b) c. Deferred compensation d. Keogh

A SEP is available to small employers. Contributions made to employees are deductible up to 25%. The correct answer is: a. SEP

Some universal policies permit a cash withdrawal. All of the following are true statements about universal life, EXCEPT: Select one: a. It is treated as a loan. b. It will reduce the cash value. c. It is not subject to interest. d. Repayment is treated like a premium payment.

A cash withdrawal from a universal life policy is NOT treated as a loan. The correct answer is: a. It is treated as a loan.

Deductibles

A deductible is the amount owed by the insured for benefits or services received BEFORE the insurer will pay benefits. The policy must state the amount of each deductible for benefits or services under the policy coverage.

Disability Buy-sell (buy-out) Policy

A disability buy-sell (buy-out) policy is used to establish how ownership in a business is transferred upon an owner's disability. Important facts: The business owns the policy, pays premiums and receives the benefits. The benefit is used by the business to purchase the disabled owner's share in the business. The elimination period in buy-sell policies is one to two years. The benefits may be paid in monthly periodic payments or in a lump sum. Disability Buy-sell = Buys Out Disabled Partner

Disability Reducing Term Insurance

A disability reducing term policy pays a monthly benefit to pay off a business' loan if the business owner becomes disabled. This protects the business from losing assets if loans are in default. The business owns the policy, pays the premiums, and receives the benefit. The business owner is the insured.

What business disability insurance policy will pay off a business' loan if the owner becomes disabled? Select one: a. Key person disability b. Disability buy-sell c. Business overhead expense d. Disability reducing term

A disability reducing term policy pays off a business' loan if the owner becomes disabled. d. Disability reducing term

Copayments

A fixed amount of money paid by a health plan enrollee at the time of service. The health plan pays the remainder of the charge directly to the provider. Copayments are payments the insured makes for benefits or services provided under the policy coverage. Copayments, or "copays," may be made to the insurer or the medical personnel or facility, depending on the policy. The policy must state the amount for each copayment for benefits and services under the policy coverage. Copayments are usually small dollar amounts ranging from $5 to $40. Copayments are based on a dollar amounts.

Workers Compensation

A form of insurance paid by the employer providing cash benefits to workers injured or disabled in the course of employment. Most employers are required to have Workers' Compensation insurance. WC benefits include medical, disability income, death, and rehabilitation benefits. -Medical benefits are provided to an employee until the condition is completely treated or cured. -Disability income benefits are relatively small, but are paid after the employee undergoes a waiting period called an elimination period. -If the disability extends beyond the elimination period, then disability income benefits will be paid in an amount of 66 2/3% of weekly wages for a permanent total or temporary total disability. -For partially disabled employees, the weekly benefit is equivalent to the percentage of wages lost due to inability to work. -Death benefits include a one-time burial payment and weekly income in an amount of 66 2/3% of the deceased employee's weekly wage for a dependent spouse and children. -Each state has a maximum time and amount limit for weekly income benefits. -Rehabilitation benefits include physical and occupational therapy, medical equipment and cost of living expenses while the employee is being rehabilitated.

Required Provision 3: Grace Period

A grace period of at least 7 days for weekly premium policies, 10 days for monthly premium policies and 31 days for all other policies, will be granted for the payment of each premium falling due after the first premium, during which grace period the policy coverage will continue IN FORCE. If the premium is not paid during the grace period, the policy will lapse. 7 day = Weekly, 10 days = Monthly, 31 days = Over Monthly

Which of the following is not a defined contribution plan? Select one: a. 401(k) b. Group deferred annuity c. CODA d. Money-purchase pension plan

A group deferred annuity is a defined benefit plan. The correct answer is: b. Group deferred annuity

Guaranteed Renewable Provision

A guaranteed renewable policy guarantees continuation of coverage for the insured until the insured reaches a specified age, as specified in the policy, but provides the insurer the right, at the time of renewal of a policy, to make changes in premium rates by classes of insureds, not individually. Premiums CAN be increased on policy anniversary dates. The insurer can only cancel or refuse to renew coverage for failure to pay premiums. Typically, health insurance policies stipulate that coverage cannot be renewed beyond the age of 65, because individuals are eligible for Medicare. Disability income policies will extend the age 65 cutoffs if the insured can prove that he or she is currently employed full-time. Guaranteed Renewable = Guarantees Only Coverage, Not Premiums

Guaranteed Renewable

A health insurance policy providing continuation of coverage of the insured to a specified age subject to payment of premiums and allowing the insurer to increase premium rates by classes of insureds.

Felony Clause

A kind of exclusion. Death that occurs as a result of the insured committing a felony may be excluded. For example, if an insured is shot and killed by police during the commission of an armed robbery, their death may result in the insurer's refusal to pay out death benefits.

Hazardous Occupation Clause:

A kind of exclusion. If the insured dies as a result of a hazardous occupation or hobby, the insurer will not pay the claim. Examples of hazardous occupations or hobbies include: acrobatic pilots, auto racers, and skydiving. Examples of hazardous occupations include: crop-dusting pilots, professional auto racers, and oil field scuba diver. Instead of excluding coverage all together, sometimes insurers will charge a higher premium for those involved in hazardous occupations or hobbies.

Suicide Clause = 1 or 2 year

A kind of exclusion. If you kill yourself within 1-2 years of getting a life insurance policy the insurer won't pay out the death benefit. They will, however, refund the premiums paid up to that point, without interest.

The aviation Clause = Charge Higher Premiums

A kind of exclusion. The insurer won't pay a claim if the insured dies due to involvement with aviation, such as a military pilot flying a jet aircraft. Individuals flying in commercial aircraft as fare-paying passengers would not be excluded from coverage. Each policy's aviation clause is different. Some policies specify that flights must be regularly scheduled, whereas, other policies cover nonscheduled flights as well. Most insurers today will not deny coverage to people involved in aviation; instead, insurers will charge higher premiums to compensate for the added risk.

Legal Hazard

A legal hazard is the application of laws, regulations, and legal court rulings that increase the chance or amount of loss. A person who files a lawsuit without any real evidence of infliction or damage suffered from another party is engaging in a legal hazard. Another example of a legal hazard is laws and regulations that require insurers to provide coverage for losses that would otherwise not be covered such as maternity, alcoholism and drug abuse coverage.

Misrepresentation

A lie. Any written or oral statement that does not accurately describe a policy's benefits, conditions, or coverage is considered a misrepresentation. Any statement representing a health discount plan (HMO) as a form of insurance is a misrepresentation. Relating only the benefits and not including a description of conditions or limitations is misrepresenting the policy. Suggesting a policy is better suited for a prospective applicant than the facts would indicate to a reasonable person is misrepresentation.

Limit of Liability

A limit of liability is the total amount the insurer will pay for an insured risk. This term is more often used in the property and casualty lines, but the concept is transferrable to health insurance as the lifetime maximum benefit. For example, the lifetime maximum benefit on a health insurance policy is $1 million, which means that the insurer will pay a maximum of $1 million for all claims on the insured. Policies may also contain sub limits, termed inside limits, which restrict the dollar amount of certain coverages within a policy, such as a room and board limit of $200 per day.

The long-term care insurance shoppers guide is in the format developed by: Select one: a. The insurers b. The Commissioner c. The Connecticut legislature d. The NAIC

A long-term care insurance shopper's guide in the format developed by the National Association of Insurance Commissioners or developed or approved by the Commissioner must be provided to all prospective applicants. For agent solicitations, the agent shall deliver the shopper's guide prior to the presentation of an application. For direct response solicitations, the shopper's guide shall be presented in conjunction with any application. d. The NAIC

A Loss

A loss is defined as an unintentional decrease in value of an asset.

Single Premium Deferred Annuity (SPDA)

A lump sum payment is made to the insurer, and the payments to the annuitant are deferred until a specified time. The monies deposited grow tax-deferred until annuitization.

Single Premium Immediate Annuity (SPIA)

A lump sum payment is made with the insurer, and payments to the annuitant start immediately.

Sickness

A medical condition, disease or illness that appears after the policy's effective date.

Moral Hazard

A moral hazard is defined as the predisposition, character, habits and values of a person that increase the chance of a loss occurring. Moral hazards are corrupt and fraudulent inclinations of the insured, which actively defraud the insurer. Moral hazards are typically cases in which the insured purposefully incurs a loss in order to receive benefits from the insurer, or exaggerate the loss in order to receive more benefits from the insurer. An insured that submits a false claim to the insurer is committing a moral hazard. Individuals have first-hand knowledge of how they will act in a given situation. This information is usually unknown to insurers. Moral hazards occur when insureds take advantage of this information asymmetry to exploit the insurer. One example of a moral hazard is an applicant's addiction to drugs or alcohol.

Morale Hazard

A morale hazard is an insured's careless attitude, indifference or lack of responsibility, which increase the chance of a loss occurring. An insured who believes the following: "It doesn't matter if I get sick because I have health insurance," is committing a morale hazard. A person who takes fewer precautions and preventive measures to remain in good health because "the health insurance policy will cover the medical bills," is committing a morale hazard.

Noncancellable Provision

A noncancellable policy provides the insured the right to continue coverage by making timely payment of premiums. The insurer cannot make changes to a noncancellable policy without the consent of the insured. The noncancellable renewability provision is the same as the guaranteed renewable provision, except that premiums CANNOT be increased. A disability policy can be written as noncancellable because the benefits are not affected by inflation (i.e., the benefit amount will not change). Noncancellable Provision = Guarantees Coverage and Price

Dual Benefit Eligibility

A person who is eligible for multiple Social Security benefits, such as survivors and retirement. If a person is eligible to receive DUAL Social Security benefits, he or she will receive the larger amount, but not both. An example of dual benefit eligibility is a person who is eligible to receive both spousal benefits and retirement benefits.

Physical Hazard

A physical hazard is defined as a physical characteristic that raises the loss potential for a particular peril. Some examples of physical hazards include: Poorly constructed roofs, Uneven sidewalks, Icy roads and Improperly stored toxic waste.

All of the following statements are true regarding the taxation of personal life insurance used for charity, EXCEPT: Select one: a. In order for tax deductions to be valid, the charity must retain full ownership rights of the policy. b. A charity may be made a beneficiary of a personal life insurance policy, in which case ownership need not be relinquished. c. When a charity is made a beneficiary of a personal life insurance policy, premiums are tax-deductible. d. When a charity is made a beneficiary of a personal life insurance policy, the policyowner retains the right to change the beneficiary.

A policy may be given to the charity, and the value of the policy is tax-deductible. If the individual chooses to make the premium payments for the charity, those are also tax-deductible. The charity MUST retain ownership and rights of the policy for the tax deductions to be valid. The individual may also make the charity a beneficiary of a policy WITHOUT relinquishing ownership. In this case, payments of premiums are not tax-deductible, and the proceeds will be deducted from the estate as a charitable contribution. But this also allows the policyowner to retain the right to change the beneficiary, if necessary. The correct answer is: When a charity is made a beneficiary of a personal life insurance policy, premiums are tax-deductible.

Preauthorization or Preadmission Certificate

A policy may require that the insured or medical providers obtain approval from the insurer before performing a medical procedure. Benefits or services which require preauthorization are payable only upon obtaining that approval. The policy must state what types of benefits or services require preauthorization and the process for obtaining approval from the insurer.

Lifetime, Annual or Per Cause Maximum Benefit Limits

A policy may set a limit on all or certain benefits on a lifetime, annual, or per cause basis. Once the insurer has paid benefits reaching or exceeding the limit, the insurer is no longer obligated to pay for those benefits. The policy must state any benefit with limits, the amounts, and the period of the limitation.

Premium

A premium is the amount to be charged for a certain amount of insurance coverage. The policyowner pays premiums to the insurer. The premium amount is established by the insurer and is based on the degree of the risk insured.

Probationary Period

A probationary period is the time between the effective date of the policy and the date coverage begins for all or certain physical conditions. The probationary period protects the insurer from paying claims caused by an insured's pre-existing conditions. This prevents insurers from "buying a claim." For each type of coverage or condition that has probationary periods, the policy must state the term of the period before coverage begins.

A producer must report any administrative action taken against them to the Commissioner within: Select one: a. 15 days b. 21 days c. 30 days d. 31 days

A producer shall report to the Commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in Connecticut not later than... 30 DAYS ...after the final disposition of the matter. The report shall include a copy of the order, consent to order or other relevant legal documents. Not later than 30 days after the initial pretrial hearing date, a producer shall report to the Commissioner any criminal prosecution taken against the producer in any jurisdiction. The report shall include a copy of the initial complaint filed, the order resulting from the hearing and any other relevant legal documents.

Insuring Clause

A promise to pay. The insuring clause states the (1 )scope of coverage, (2) the promise to pay benefits under the terms of the policy, (3) any conditions within the policy, and (4) any definitions required by law. Insuring clauses typically contain a statement that "benefits are subject to all the provisions, conditions, and exclusions of the policy."

While at work, a heavy box falls on Emily's foot breaking three of her toes. She is unable to work for one month. Two months later while working, she breaks her toes again. Which of the following definitions of disability applies to Emily's situation? Select one: a. Presumptive disability b. Partial disability c. Residual disability d. Recurrent disability

A recurrent disability is a disabling injury that occurs as the result of a prior disabling injury. The correct answer is: Recurrent disability

Recurrent Disability

A recurrent disability provision is a time period specified in the policy during which the recurrence of a disabling condition is considered an EXTENSION of a prior disability. This provision prevents the insured from needing to fulfill another elimination period for a disability that has simply reappeared. The recurrent disability provision is usually a period of 90 days, but in some policies is six months. Recurrent Disability = No New Elimination Period If Relapse

Incontestable Clause

A required provision in a life insurance policy which prevents the insurer from denying a claim or voiding a life insurance policy, except for nonpayment of premiums, after the policy has been in force for a certain number of years, usually 2.

A deferred annuity with a decreasing term life insurance rider is a: Select one: a. Life annuity b. Retirement income annuity c. Annuity certain d. Tax-sheltered annuity

A retirement income annuity provides both a death benefit (with a decreasing term rider), and the annuity's surrender value if the annuitant dies before retirement. The correct answer is: b. Retirement income annuity

Waiver of Cost of Insurance

A rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability. The waiver of cost of insurance, or waiver of monthly deductions rider, allows a universal life policyowner who becomes disabled to waive the cost of death protection, but does not waive the cost of premium required to build cash value. Example: If the minimum premium is $900 and the target premium is $1100, the waiver of cost of insurance rider will only cover the $900 to keep the death protection in force.

Transfer for Value Rule

A rule that specifies that, subject to certain exceptions, if a life insurance policy is transferred from one owner to another for valuable consideration, the death proceeds will be subject to federal income taxation. In other words, the new owner of the policy will be responsible for paying taxes on the amount of proceeds paid (including premiums that were paid by the original owner) that exceed the valuable consideration. The exceptions to this rule are: Transfers to the insured, Transfers to a business partner of the insured, or Transfers to a corporation in which the insured is a stockholder or officer.

Basic dental plans provide coverage through a: Select one: a. Usual, customary and reasonable basis b. Schedule c. Prepaid basis d. Combination basis

A schedule lists the procedures and each benefit amount for a basic dental plan. The correct answer is: b. Schedule

Single Premium Whole Life

A single premium whole life policy (SPWL) allows the policyowner to pay the entire premium in one large sum at the outset of the policy, and have coverage for the insured's entire life. The face amount is level. If the insured lives to the age of 100, the policy endows and the face amount is paid to the policyowner. The interest on a single premium whole life policy is a guaranteed minimum as stated in the policy. The Internal Revenue Code requires single premium policy face amounts be at least 100% to 250% of the cash value, contingent upon the insured's age. Single premium whole life policies are suitable for people who have a large amount of liquid capital to fund a relatively conservative investment.

Medicare Part D coverage may be provided in two ways:

A stand-alone plan (fee for service basis) providing prescription drug coverage to Original Medicare, or Through a Part C plan that includes prescription drug coverage.

Incontestability Clause

A standard provision for group life and health insurance, stating that except for nonpayment of premium, the policy is incontestable after having been in force for at least two years.

A supplemental illustration for a life insurance contract must be provided with: Select one: a. Basic illustration b. In force illustration c. Nonguaranteed element d. Guaranteed elements

A supplemental illustration may be provided so long as it is appended to, accompanied by or preceded by a basic illustration. The correct answer is: Basic illustration

Federal Estate Tax

A tax imposed on the transfer of property at death. Estates exceeding certain amounts are subject to federal estate taxes.

Temporary Disability

A temporary disability prevents the insured from working during the recovery and rehabilitation process, but the insured is expected to recover completely. An example would be a heart attack or stroke.

-Term Rider

A term rider adds term coverage to an existing life insurance policy. There are several varieties of term riders, including: Spouse/other insured, Children, Family, Return of premium and Return of cash value.

Viatical Settlement

A terminally or chronically ill insured can sell their life insurance policy to a third party in exchange for payment of a large portion of the death benefit. The insured may receive anywhere from 50% - 80% of the death benefit. This may be a feasible option for insureds that need a large sum of money to pay medical bills prior to death. Viatical settlements are completely separate from life insurance contracts. HIPAA requires that proceeds from a viatical settlement are exempt from federal income tax.

Viatical Settlements

A terminally or chronically ill insured can sell their life insurance policy to a third party in exchange for payment of a large portion of the death benefit. This may be a feasible option for insureds that need a large sum of money to pay their medical bills prior to their impending death. Viatical settlements are completely separate from life insurance contracts. In a viatical settlement, the third party that purchases the insured's life insurance policy is termed the viatical settlement provider, and the insured is termed the viator. The portion of the death benefit the viator receives in a viatical settlement ranges from 50 to 80 percent of the death benefit. As the owner of the viator's life insurance policy, the viatical settlement provider pays the premiums and will receive the full death benefit, not subject to income tax, when the viator dies. Viatical producers and brokers sell viatical settlements. Viatical producers work for and represent viatical settlement providers. Viatical brokers work for and represent viators. Viatical settlement providers, producers and brokers all must be licensed with the state in which they transact business. While the purchase of a viatical settlement may seem like a simple way to get immediate cash, there are several drawbacks to consider. First of all, viatical settlement payouts may be subject to creditors' claims if the insured has debt. Additionally, viators may be unable to receive benefits through Medicaid or Supplemental Social Security Income. These are considerations, which may persuade insureds to seek other routes for obtaining necessary funds.

What is OBRA?

A time extension of COBRA in case of disability. The Omnibus Budget Reconciliation Act (OBRA) passed by Congress extended COBRA benefits to 29 months if the individual becomes disabled during the first 60-day period of coverage under COBRA. This allows the individual to fulfill the eligibility period for Social Security disability benefits. If the individual recovers during the 11 extra months provided under OBRA, then OBRA continuation coverage will end.

A viatical settlement provider shall not act in the same viatical settlement also as a viatical settlement: Select one: a. Broker b. Mediator c. Proponent d. Advocate

A viatical settlement provider shall not act also as a viatical settlement broker in the same viatical settlement. a. Broker

Void and Voidable Contracts

A void contract is an agreement that doesn't have legal effect, and, therefore, is not a contract. Void contracts are not enforceable by either party. Unlike a void contract, a voidable contract is a valid binding contract that can be voided at the request of a party with the right to reject. For example, an insurance company may void a life insurance contract if material misrepresentation is discovered within the first two years of policy issue, during the contestable period. After the contestable period, the insurer cannot void the policy or deny benefits because of material misrepresentation, concealment, or fraud.

Waiver of Premium

A waiver of premium provision provides for the continuation of coverage without payment of premiums if the insured becomes totally and permanently disabled.

Which peril is covered by AD&D policies? Select one: a. Premature death b. Accident c. Sickness d. Accident and sickness

AD&D policies cover accident only. The correct answer is: Accident

All of the following correctly demonstrate policy delivery, EXCEPT: Select one: a. The insurance company mails the policy to the policyowner b. The insurance agent delivers the policy in-person c. The application is approved by the underwriter d. The insurance company mails the policy to the insurance agent, who in turn, delivers the policy to the policyowner

ANSWER: C. The application is approved by the underwriter.

Annual Premiums = Monthly Premiums =

AP = Least Expensive MP = Most Expensive

Long-term Care Rider =

Accelerated Benefits Rider

Accelerated Benefits

Accelerated benefits allow policyowners to use their policy's death benefits tax-free while they are still alive, or if they are terminally or chronically ill. A terminally ill person must be expected to die within two years. Examples of terminal and chronic illnesses are cancer and AIDS. Is unable to perform at least two activities of daily living without assistance, Has a disability, or Is cognitively impaired and requires supervision to ensure health and safety. The Health Insurance Portability and Accountability Act (HIPAA) of 1996 requires that proceeds from accelerated benefits are exempt from federal income tax.

AD&D

Accidental death and dismemberment (AD&D) policies pay a LUMP SUM payment if the insured dies in an accident, or loses major body parts in an accident.

Accidental Death and Dismemberment

Accidental death and dismemberment (AD&D) policies pay a lump sum payment if the insured dies in an accident, or loses major body parts in an accident. AD&D = Die From Accident

Adam's Paint Company provides all funds for its group health insurance plan, but uses an insurance company for the processing of claims. Which plan does Adam's Paint Company use? Select one: a. PPO b. POS c. ASO d. HSA

Adam's Paint Company has a self-funded group health insurance plan with administrative services only (ASO) performed by an insurer. The correct answer is: ASO

Rebating

Adding a little summin' summin' to get someone to buy insurance. Rebating occurs if a buyer of an insurance policy is given anything of significant value as an inducement to purchase or renew a policy. Any inducement in the sale of insurance that is not specified in the insurance contract itself is a rebate. For instance, splitting a commission with a prospect is not a part of the insurance contract and, therefore, constitutes a rebate. Rebates include not only cash, but also personal services or items of value. Keep in mind that most states do not consider a small token gift, under $25.00, used for advertising is not considered rebating.

Which term accurately describes the fact that insurance policies are, take it or leave it, contracts?

Adhesion

What are the rules for advertising as an agent?

Advertising in ANY communication intended to sell, e.g., phone calls, print sources, in-home presentations. -Advertisements must be clear and avoid misleading information. -The name of the insurer must be stated in the advertisement. Trade names may not be used. -Advertisements must state their intent and the nature of the product advertisement. -Advertisements cannot contain false statements. -If testimonials are used, they must be representative of the person's actual opinion; if testimonials are financial endorsements of a product, the advertisement must indicate the testimonial is a paid endorsement.

Stop-loss Feature

After coinsurance is paid, most major medical policies incorporate a stop-loss feature, also referred to as an out-of-pocket limit, which prevents the insured from incurring catastrophic loss. Once the insured's total out-of-pocket expenses reach the stop-loss limit, the insurer pays the remaining eligible expenses. Some policies specify they will cover 100% of eligible expense after a certain dollar amount of out-of-pocket expenses. Other policies may state that coinsurance will apply only to the next $5,000 of eligible expenses after the deductible is paid, after which the insurer will cover the remaining eligible expenses. Example: Assume Jake has a major medical policy with a $200 deductible and 80/20 coinsurance that applies for the next $5,000 of expenses. After that point, the insurer will cover the remaining eligible expenses. If Jake incurs $30,000 medical expenses, how will the bill be split up? The total bill is $30,000. First, Jake must pay the $200 deductible. This leaves a balance of $29,800. Coinsurance will apply on the next $5,000 of the bill. This means Jake will pay $1,000 of coinsurance (20% of $5,000 is $1,000). This leaves a balance of $28,800, which the insurer will pay. This means Jake's total out-of-pocket expenses on the medical bill are limited to $1,200.

Other factors that affect an applicant's underwriting for health insurance include:

Age, Sex, Medical history, Family history, and Hobbies. Older applicants tend to represent higher risks and have higher premiums. Insurance companies typically limit an insured's coverage under an individual health insurance plan to age 65. Women tend to have higher disability rates than men. Medical and family history is often a good indicator for the reemergence of health problems. Finally, dangerous hobbies an applicant pursues, such as cave diving, heli-skiing and bull riding increase the insurance company's risk.

What Preventative services are required to be covered by new health care plans (after 2010) according to the PPACA?

All new health care plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. This rule is effective for health plans beginning on or after September 23, 2010. Other covered preventive services include: Alcohol Misuse screening and counseling Blood Pressure and Cholesterol screening for adults of certain ages or high-risk Depression screening for adults Diabetes screening for adults with high blood pressure and Obesity screening and diet counseling HIV screening Immunizations

Blain's Spa and Salon has a group health plan for his employees. Blain pays for the entire cost of coverage. Which of the following is true? Select one: a. The plan is noncontributory and all eligible employees must participate in the plan. b. The plan is contributory and 75% of all eligible employees must participate in the plan. c. The plan is noncontributory and only the hairstylists must participate in the plan. d. The plan is contributory and 100% of all eligible employees must participate in the plan.

All of Blain's eligible employees must participate in the plan since he is paying the entire cost of coverage. The correct answer is: a. The plan is noncontributory and all eligible employees must participate in the plan.

Which of the following correctly describes Social Security survivors benefits for a covered worker who is fully insured? Select one: a. Monthly payments to the widow equal to the deceased spouse's PIA if the widow is age 65 or above b. Lump-sum death benefit paid to the widow and eligible children of the deceased covered worker c. Monthly payments to a dependent parent age 62 and above d. All of the above

All of the above

When a life insurance policy becomes a MEC, what are the tax consequences? Select one: a. Interest loses tax-deferred advantage. b. Premiums are no longer tax-deductible. c. Premiums do not accrue interest. d. Withdrawals and policy loans are taxed as ordinary income.

All withdrawals and surrenders from a MEC are taxable, but the interest accrued on the cash value is tax-deferred, and the death benefit is tax-free if received in a lump-sum. The correct answer is: Withdrawals and policy loans are taxed as ordinary income.

Substitute Insured Rider or Exchange Privilege Rider

Allows the insured under a life insurance policy to be changed. The substitute insured rider is useful for business life insurance contracts where key employees change employers or retire. Rather than go through the policy replacement process, the substitute insured rider allows the policy to continue with the same face amount; however, the policy premiums will be refigured based on the new insured's age, health, sex, and insurability. Substitute Insured Rider = Used In Business Life

Medicare

Also referred to as Title 18, Medicare is a federally funded social insurance program that provides health insurance for people age 65 and older, regardless of whether they continue to work beyond the age of 65. Medicare also provides benefits to people, regardless of age, who: Qualify for Social Security, Qualify for Railroad Retirement Board disability benefits, Have ESRD (end stage renal disease - permanent kidney failure), or Have Lou Gehrig's disease.

A Medicare supplement policy must provide coverage Medicare Part A-eligible expenses for hospitalization: Select one: a. For the length of the illness b. For the first year c. From days 1 through 90 d. From days 61 through 90

Among the minimum benefits Medicare supplements must cover is coverage for Medicare-eligible expenses for hospitalization not covered by Medicare from days 61 to 90 in any benefit period. The correct answer is: From days 61 through 90

All of the following are true regarding traditional IRAs, EXCEPT: Select one: a. If an individual does not have a retirement plan through their employer, the entire contribution to the IRA may be deducted from gross income up to the annual contribution limit. b. Interest earned on IRA contributions is taxable in the year earned. c. All withdrawals are taxed. d. The amount of money an individual can contribute to their IRA is limited, and indexed annually.

An IRA may be deducted from gross income up to the annual contribution limit. Interest earned on IRA contributions is tax-deferred until withdrawn. The correct answer is: Interest earned on IRA contributions is taxable in the year earned.

-Annuity Rider

An annuity rider can be added onto a life insurance policy. Annuities, which protect against the chance of depleting income for prolonged life, are discussed in detail in a later chapter.

How do I qualify for Medicaid nursing home and home health care benefits?

An applicant must first pass the means tests, which verify that the applicant has limited income and assets, and cannot afford the cost of their medical expenses. Applicants must also be United States citizens and require nursing home care. The applicant must also be: Disabled, Blind, or Over the age of 65. Some assets are not included in the asset limitation tests, such as: The applicant's primary residence, One vehicle, and Wedding ring.

How does credit history figure into the application process?

An applicant's credit history is sometimes used for underwriting. The Fair Credit Reporting Act (FCRA) requires the applicant be notified at the time of application that a credit report may be requested, regardless if a credit report will be requested or not. Consumers must also be informed that they have the right to request additional information about the report, such as the name of the company that provided the report. Such additional information must be provided to consumers within five days, if requested. Note, however, that the insurance company cannot tell the client what was in the report or why the client has been denied.

Graded Vesting

An employee becomes partially vested in a retirement plan after an initial period of time, then becomes vested in an additional percentage each year until fully vested. (Think increments or steps)

An employer that has a self-funded health plan, but contracts out claims processing, has hired a(n): Select one: a. ASO b. TPA c. MET d. MEWA

An employer can contract out the claims processing to a third party administrator (TPA). The correct answer is: TPA

Controlled Business

An entity that obtains and possesses a license solely for the purpose of writing business on the owner, immediate family, relatives, employer and employees.

Which of the following fixed annuities has a minimum rate of return and a current rate of return that is connected to the S&P 500? Select one: a. Fixed annuity b. Market value adjusted annuity c. FPDA d. Equity indexed annuity

An equity indexed annuity will earn a guaranteed minimum interest rate up to a current interest rate that is tied to an equity index, such as the S&P 500. The correct answer is: d. Equity indexed annuity

Who can enroll in Medicare Part C?

An individual can enroll in Part C if he or she has Parts A and B, lives in the plan's service area, and doesn't have ESRD. An individual insured under an employer health plan may also be insured under a Part C plan.

How does HIPAA protect coverage when folks change jobs?

An individual who moves from one job to another is eligible for GUARANTEED ISSUE (i.e., coverage is issued without regard to the individual's health conditions; no underwriting, and no medical questions on the application) under the NEW employer's health plan if the individual's total creditable coverage is at least 18 months.

In Connecticut, an insurance agent must provide a notice of information practices to all life insurance policy applicants: Select one: a. Before personal information is collected from the applicant b. On the date when personal information is collected from the applicant c. Within 3 days after personal information is collected from the applicant d. Within 7 days after personal information is collected from the applicant

An insurance agent shall provide a notice of information practices to all applicants or policyholders in connection with insurance transactions: in the case of an application for insurance, at the time of policy or when personal information is collected only from the applicant or public records, or at the time the collection of personal information is initiated when personal information is collected from a source other than the applicant or public records. The correct answer is: b. On the date when personal information is collected from the applicant

Claim

An insurance claim is the insured's notification to the insurer that a payment is requested for a covered loss. The term claim applies to all lines of insurance.

Renewability Provisions

An insurance policy must contain a provision for renewability that is either (1) noncancellable, (2) guaranteed renewable, (3) conditionally renewable, or (4) optionally renewable. Single-term nonrenewable policies must provide a nonrenewable provision stating that the policy may not be renewed.

An insurance producer wanting to do business under an assumed name must notify the Commissioner: Select one: a. Prior to using the assumed name b. Within 3 days of using the assumed name c. Within 5 days of using the assumed name d. Within 7 days of using the assumed name

An insurance producer doing business under any name other than his legal name shall notify the Commissioner prior to using the assumed name.

Permanent Disability

An insured is never expected to recover from a permanent disability, causing the insured to be unable to work permanently. Examples of permanent disability include loss of limbs and total blindness. Permanent Disability = Loss of Limb, Blindness

What is the following sentence: "This policy may not cover all of your medical expenses?" Select one: a. "Notice to buyer" b. "Supplement to viator" c. "Viatical notification" d. "Pro Rata Statement"

An insurer, directly or through its producers, shall establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate; establish marketing procedures to assure excessive insurance is not sold or issued; display prominently by type, stamp or other appropriate means, on the first page of the policy the following: "Notice to buyer: This policy may not cover all of your medical expenses,"; inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the types and amounts of any such insurance; and establish auditable procedures for verifying compliance with these laws.

Annual Renewable Term

Annual renewable term (ART) or yearly renewable term (YRT) provides a level face amount with an increasing premium. ART is guaranteed renewable annually without proof of insurability. ART usually has a maximum age at which the policy is no longer renewable.

Level term insurance provides a level face amount throughout the policy period. There are two types of level term:

Annual renewable term and Level premium term.

Health insurance premiums may be paid on what time frames?

Annually, Semiannually, Quarterly, or Monthly.

Annuities

Annuities protect against the risk of living longer than expected. Annuities provide a guaranteed life income to protect against the risk of depleting retirement funds.

IRAs may be funded by a number of investment vehicles including:

Annuities, Savings accounts, Bank accounts, or Mutual funds.

Fixed-period Installments use _______________.

Annuities.

The amount of each annuity payment is based on the following factors:

Annuity cash accumulation Payout guarantees, if any Annuity payment frequency Loading The assumed interest rate The annuitant's age The annuitant's sex The more cash value available at the time of annuitization, the larger the annuity payment

All of the following are true of the life with period certain annuity payout option, EXCEPT: Select one: a. The annuitant is provided with guaranteed income for life. b. Payments are guaranteed for a minimum number of years. c. Any balance in the annuity fund after the period certain ends is refunded to a beneficiary. d. The life with period certain option does not guarantee the full value of the annuity will be paid out.

Any balance in the annuity fund after the period certain ends, is retained by the insurer. The correct answer is: Any balance in the annuity fund after the period certain ends is refunded to a beneficiary.

Any licensee who negotiates any contract for insurance in any unauthorized company shall forfeit their license if not previously revoked and shall be imprisoned not more than: Select one: a. 4 months b. 6 months c. 9 months d. 12 months

Any licensee who negotiates, continues or renews any contract for insurance in any unauthorized company, and who neglects to make and file the affidavit and statements required by said sections, or who willfully makes a false affidavit or statement, or who negotiates, continues or renews any such contract of insurance after the revocation or during the suspension of the licensee's license, shall forfeit the license if not previously revoked and shall be fined not more than $4,000 or imprisoned not more than 6 MONTHS, or both.

Any person or corporation that commits a false statement of assets or advertisements which do not conform to the last filed statement shall for the first offense forfeit to the state: Select one: a. $10,000 b. $20,000 c. $30,000 d. $40,000

Any person or corporation that commits a false statement of assets or advertisements which do not conform to the last filed statement shall, for the first offense, forfeit to the state $10,000 and, for each subsequent offense, $20,000.

Any person or corporation violating an insurance law of which no other penalty is provided shall be fined not more than: Select one: a. $10,000 b. $15,000 c. $20,000 d. $25,000

Any person or corporation violating an insurance law of which no other penalty is provided shall be fined not more than $15,000.

In Connecticut, any person who violates a cease and desist order is subject to a monetary penalty for each violation of up to: Select one: a. $10,000 b. $25,000 c. $50,000 d. $62,000

Any person who violates a cease and desist order while such order is in effect will, after notice and hearing and upon order of the Commissioner, be subject to any one or more of the following: -A monetary penalty of not more than $10,000 for each and every act or violation; OR -Suspension or revocation of such person's license.

Optional Provision 7: Unpaid Premium

Any premium due and unpaid may be deducted from the payment of a claim.

Optional Provision 9: Conformity with State Statutes

Any provision of the policy in conflict with the statutes of the state or territory in which the insured resides will be amended to conform to the minimum requirements of such statutes. This provision assures that policies are always in alignment with the state laws

Apparent Authority

Apparent Authority Apparent authority deals with the relationship between the insurer, the agent and the customer. Apparent authority is a situation in which the insurer gives the customer reasonable belief that an agent has the power and authority to bind the principal, even in cases where the agent does not have such authority. The materials provided to an agent by his or her company are considered to be evidence of that agent's apparent authority. The customer may be led to a false impression because of an agent's actions. Example: An example of this is a life insurance agent's perceived ability to bind the insurer. Even though the agent cannot bind the insurer, the insured may perceive the agent to have such authority. The insurer cannot refute the relationship that was established with the agent.

The sources used to gather information during the underwriting process include:

Application, Medical Report, Attending Physician Statement, Investigative Consumer (inspection) report, Credit report, Medical Information Bureau, Medical examinations and lab tests and Special questionnaires.

Closed Panel

Arrangement in which medical providers may only treat patients that are part of the managed care plan.

Open Panel

Arrangement in which medical providers may treat any patient.

Businesses use life insurance for three main purposes:

As a funding tool For business interruption insurance As an employee benefit

A long-term care insurance policy must contain which of the following provisions? Select one: a. Coverage for drug and alcohol dependency b. Probationary period of no longer than 180 days c. Coverage for conditions that result from war d. Guaranteed renewability

As a result of the 1996 Health Insurance Portability and Accountability Act (HIPAA), all long-term care policies sold today must be guaranteed renewable. The insurer cannot cancel the policy and must renew coverage each year, as long as the insured pays the premiums. The correct answer is: Guaranteed renewability

Cash Surrender Option

As the name implies, the cash surrender option allows the policyowner to receive the policy's cash value. In most states, policies that build cash value must begin to accrue cash value by the end of the third policy year. For industrial life policies, cash value must be available after five years. Cash Value = Year 3

Assessment insurers

Assessment insurers assess policyholders a premium when losses are incurred. Some assessment insurers only collect premiums when losses are incurred, while others collect advance premiums and additional premiums, as necessary, if losses cannot be sufficiently covered by the advance premium.

Notice of a possible credit report MUST be given to a consumer when?

At time of application.

Medicare Supplement policy rates can be based on:

Attained-age, Issue-age, or Community-rated pricing. Attained-age With attained-age pricing, the price paid for a Medicare Supplement Plan is based on the insured's current age, or the age of the insured when he or she "attained" the policy and the insured's premiums will increase, as the insured gets older. Issue-age Some Medicare Supplement Plans are based on issue-age pricing, which means that the insurance company bases the cost of premiums on the age of the insured at the time of purchase or issue and premiums will not go up due to age. Community-rated With community-rated pricing, Medicare Supplement Plans charge the same premium to all beneficiaries, regardless of their age and overall health condition.

Explain the 5 Methods of Handling Risk

Avoidance Risk avoidance is deliberately steering clear of exposure to a risk. Risks are avoided by refusing to engage in activities that expose a person to risk. Some risks are effectively dealt with by risk avoidance. For example, if a person wants to avoid the risk of injury or accident from being a passenger in an airplane, they could completely avoid air travel. Avoidance is not always the most practical way of handling risk. Retention Self-insurance is a type of risk retention. Risk retention is when a person chooses not to take proactive steps to transfer, avoid or reduce the risk. Instead, a person deals with the risk when it happens. Risk retention is a fairly common method for dealing with risk. As mentioned earlier, there are numerous risks people are exposed to daily. It is not financially practical to handle these risks other than through risk retention. One type of risk retention is self-insurance. This is when a person is aware of the risk and chooses to be financially responsible for any losses that may occur. Risk retention is most often used for risks that result in smaller losses. The person is known as a self-insurer. Sharing Risk sharing is when an insured and an insurance company share the cost of risk. For example, health insurance policies with deductibles require the insured pay a portion of the loss before the insurer pays. The deductible is a form of risk sharing. Reduction Risk reduction is accomplished by actively finding ways to minimize the loss exposure to a risk. Risk reduction is characterized by two methods: Loss prevention, and Loss control. Examples of loss prevention in health insurance include annual wellness exams and employer-paid fitness memberships. Examples of both loss control and prevention in life and health insurance are flu shots and smoke-free premises. Transfer Risk transfer is the essence of insurance. Risk is transferred from one party to another. The Insurer charges a small premium in exchange for providing benefits to the party relieved of the risk (the insured) in the event of a covered loss.

The insurer discovers that Veronica misstated her age on the health insurance policy application. What will the insurer do? Select one: a. Void her policy b. Adjust the policy benefits c. Increase her premiums d. Decrease her premiums

B. Adjust the policy benefits The insurer will adjust Veronica's benefits to match her correct age.

Marcy cancels her health insurance policy during the middle of the policy term. What will the insurer do? Select one: a. Return all of Marcy's earned premiums on a pro rata basis b. Return a portion of Marcy's unearned premiums on a short rate basis c. Return all of Marcy's earned premiums on a short rate basis d. Return a portion of Marcy's unearned premiums on a pro rata basis

B. Return a portion of Marcy's unearned premiums on a short rate basis If the insured cancels a policy, the insurer may keep the earned premium and a portion of the unearned premium. The insured will receive a refund of a portion of the unearned premium on a short rate basis.

Business Overhead Expense (BOE) Business disability policy that helps small business owners pay overhead expenses and keep the business operating when the owner becomes disabled. This kind of coverage is tax-deductible as a business expense.

BOE= Premiums are Deductible, Benefits are Taxable

Which is not a characteristic of basic medical plans? Select one: a. Coinsurance b. First-dollar coverage c. Dollar maximum benefit per visit d. Low limits for catastrophic coverage

Base plans provide ***first-dollar coverage*** which means they do not have coinsurance or deductibles. The correct answer is: a. Coinsurance is NOT a characteristic of basic medical plans.

Which of the following medical plans has essentially replaced the outdated base plans? Select one: a. Major medical b. Comprehensive c. Managed care d. Limited policies

Base plans, major medical and comprehensive plans, are outdated in the modern insurance market. Managed care plans have essentially replaced these plans. The correct answer is: Managed care

Which basic plan covers costs an insured incurs while confined to a hospital, including room and board, nursing care, X-rays, lab fees, operating and treatment room, oxygen, blood, medications and general anesthesia? Select one: a. Medical b. Hospital c. Surgical d. Medical, hospital and surgical

Basic hospital covers costs an insured incurs while confined to a hospital, including room and board, nursing care, X-rays, laboratory fees, operating and treatment room, oxygen, blood, medications, and general anesthesia. Basic hospital plans essentially cover all costs on a hospital bill except for physician's fees and surgeries.

What are the 3 types of illustrations used in insurance literature?

Basic illustration: a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements. Supplemental illustration: an illustration provided in addition to a basic illustration, and that may be presented in a format differing from the basic illustration, but may only depict a scale of nonguaranteed elements that is permitted in a basic illustration. In force illustration: an illustration provided at any time after the policy that it depicts has been in force for one year or more.

Which of the following plans covers non - surgical physician's fees? Select one: a. Basic hospital b. Basic medical c. Basic surgical d. All base plans

Basic medical covers nonsurgical physician's fees for accidental injury or sickness. The correct answer is: Basic medical

In order to get LTC, you need to be INCAPABLE two or more Activities of daily living (or be cognitively impaired). These ADLs include:

Bathing, Dressing, eating, Mobility, Transferring, Toileting, and Continence.

Illustrations may not:

Be incomplete Depict misleading nonguaranteed elements Misrepresent the true nature of the policy Use the term vanishing premium, implying that the policy is eventually paid up, unless such is the case

Policy Dividends = Not Taxable. Why not?

Because they are returned cash from an overcharged premium.

What are the Prerequisites to a life settlement contract

Before entering into a life settlement contract with any owner of a policy in which the insured is terminally ill or chronically ill, a provider shall obtain: if the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into the settlement contract; and a document in which the insured consents to the release of the insured's medical records to a provider, broker or insurance producer, and, if the policy was issued less than two years from the date of application for a settlement contract, to the insurance company that issued the policy. The insurer shall respond to a request for verification of coverage submitted by a provider, broker or life insurance producer no later than 30 calendar days after the date the request was received. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation regarding the validity of the policy. Prior to or at the time of execution of the settlement contract, the provider shall obtain a witnessed document in which the owner consents to the settlement contract, represents that the owner has a full and complete understanding of the settlement contract, that the owner has a full and complete understanding of the benefits of the policy, acknowledges that the owner is entering into the settlement contract freely and voluntarily and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness or condition and that the terminal or chronic illness or condition was diagnosed after the life insurance policy was issued. Not later than 20 days after an owner executes the life settlement contract, the provider must give written notice to the insurer that issued the policy that the policy has become subject to a life settlement contract. All medical information solicited or obtained by any person licensed will be subject to applicable provisions of law relating to the confidentiality of medical information. Each life settlement contract entered into in Connecticut shall provide that the owner may rescind the contract not later than 15 days from the date it is executed by all parties. Such rescission exercised by the owner shall be effective only if both notice of rescission is given to the provider and the owner repays all proceeds and any premiums, loans and loan interest paid by the provider within the rescission period. A failure to provide written notice of the right of rescission shall toll the period of such right until 30 days after the written notice of the right of rescission has been given. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded, subject to repayment by the owner or the owner's estate of all proceeds and any premiums, loans and loan interest to the provider. Not later than three business days after the date the provider receives the documents from the owner to effect the transfer of the insurance policy, the provider shall pay or transfer the proceeds of the settlement into an escrow or trust account managed by a trustee or escrow agent in a state or federally-chartered financial institution whose deposits are insured by the FDIC. Not later than three business days after receiving acknowledgment of the transfer of the insurance policy from the insurer of the policy, said trustee or escrow agent shall pay the settlement proceeds to the owner.

How many hours of initial LTC training must a producer complete before selling LTC products? Select one: a. 8 Hours b. 4 Hours c. 12 Hours d. 24 Hours

Before selling LTC products, a producer must complete the Initial LTC Training - 8-Hours of initial Long-term Care training The LTC Continuing Education Live Class - 4-hours

Preexisting Conditions

Beginning in 2014, Obamacare eliminates pre-existing conditions; meaning that an individual cannot be charged more for or denied coverage based on pre-existing health conditions.

The Patient Protection and Affordable Care Act defines a full-time employee as one who works at least how many hours a month? Select one: a. 120 hours b. 140 hours c. 144 hours d. 160 hours

Beginning in 2014, the PPACA defines a full-time employee as one who works 120 hours per month or more. The correct answer is: a. 120 hours

Individuals who qualify for public assistance are those with dependent children or who are:

Blind, Disabled, or Pregnant.

How do I pay BCBS?

BlueCross BlueShield plans are prepaid because subscribers pay a fixed monthly fee for all services.

How can a long-term care policy be written? Select one: a. Stand-alone policy only b. Rider only c. Both stand-alone policy and rider d. None of the above

Both stand-alone policy and rider Long-term care policies may be written as a rider attached to a life insurance policy, or a stand-alone policy.

Business Overhead Expense (BOE)

Business overhead expense (BOE) policies were created to help small business owners pay overhead expenses and keep the business operating when the owner becomes disabled. The BOE policy does not pay the owner's salary. The business owner owns the policy and pays the premiums, but the benefits are used to pay the business' expenses such as rent, utility bills, and employee salaries. The BOE policy does not pay the owner's salary. BOE policies have elimination periods of 30 days or less and benefit periods of one to two years.

Upon policy delivery, agents must deliver to the applicant the life insurance:

Buyer's guide, and Policy summary.

How does Coordination of Benefits apply to group health plans?

COB Provisions -For married couples, each individual's own coverage is primary, and the spouse's coverage is secondary. The birthday rule applies to parents whose children are covered under both parents' policies. -The parent whose birthday falls earlier in the year has the primary plan. In divorces and separated couples, the parent with custody over the children has the primary plan. -In addition, if spouses work for the same employer and are both covered under the employer group plan, the spouse who has the sickness or accident will receive reimbursement up to the benefit maximum under the contract. The well spouse's coverage will then kick in to provide any remaining coverage needed up to 100% of the injury bill, but not for any amounts in excess of the claim.

-Cost of Living Adjustment (COLA) Rider

COLA = Inflation Protection The cost of living adjustment (COLA) rider allows the policy face amount to be adjusted to account for inflation based on the consumer price index (CPI). If the face amount is increased, the premium will be increased. If the face amount is decreased, the premium will be decreased. If the face amount cannot be adjusted, then an increasing term rider is added to the coverage. Increasing Term Rider. Term insurance that provides an increasing face amount with level premiums.

Cancellable Policies (Renewability Provisions)

Cancellable policies allow the insurer to cancel the policy at any time (some states require notice of at least 30 days), provided the insurer returns all unearned premiums. Cancellation does not limit, exclude, or in any other way affect processing of claims for the period in which the policy coverage was effective. Cancellable = With Notice

Capitation

Capitation is the payment method used by HMOs. The HMO pays in-network health care providers a fixed amount for each member of the HMO. In other words, they pay "per head" (cap = head) or per member of the HMO, not per service.

What is the term for private organizations that administer Medicare Part B benefits? Select one: a. Intermediaries b. Medical providers c. Carriers d. Peer review organizations

Carriers Carriers are private organizations which administer Medicare Part B benefits. Each state or region has its own carrier.

Why buy life insurance? (Think cash)

Cash Accumulation Life insurance policies that build cash value (whole life policies) may be used as a cash accumulation vehicle for any number of purposes. A life insurance policy that builds cash value is said to have living benefits. Some common purposes for accumulating cash include: Funding a college education, Saving for retirement, or Purchasing a home. Liquidity Life insurance policies with cash value provide the insured with immediate availability of funds, referred to as liquidity. The insured may borrow any amount up to the cash value in the policy whenever needed (as long as the policy provides for cash values).

What are the two types of refund life annuity payout options?

Cash Refund and Installment Refund

All of the following are CODA plans, EXCEPT: Select one: a. Tax-sheltered annuity b. 403(b) c. Money-purchase pension plan d. 401(k)

Cash or Deferred Arrangement (CODA) plans include: 401(k), 403(b) and tax-sheltered annuities. A money-purchase pension plan is a type of defined contribution plan. The correct answer is: Money-purchase pension plan

There are several versions of the life income option including the following:

Cash refund Installment refund Straight life Life with period certain Period certain Joint and survivor

Participating life insurance policies (par) pay dividends to policyholders. Policyholders can choose what form they want to receive their dividend:

Cash, Accumulate with interest, Purchase more coverage, Reduce premium, Pay up policy or Purchase one-year term insurance.

Casualty

Casualty insurance protects against the risk of legal liability for injury, death, disability, damage and destruction of property.

No person may act as an insurer in Connecticut without a: Select one: a. Certificate of Insurance b. Certificate of Solvency c. Certificate of Authority d. Certificate of Recommendatio

Certificate of Authority

When a member of a Group Health Policy receives a "certificate of coverage" what info is on it?

Certificates of coverage detail: -The policy, -Coverage, -Term, -Claim procedures, and -The right of conversion.

Consumer reports provide information about the applicant's:

Character, Lifestyle, and Financial stability. Consumer reports are generally only used for policies with large coverage amounts because the reports increase underwriting expenses.

Why buy life insurance? (Think giving)

Charity Life insurance may be purchased for charitable reasons. To make life insurance a charitable gift, a person purchases life insurance on their self and names the charity as the beneficiary. In most cases, the insured's premium payments are tax deductible.

Annual Premium =

Cheapest

What happens if I have a baby while under group coverage?

Children are covered from the moment of birth (or adoption); however, the insurer may require notification of the birth within 31 days in order to continue coverage. Dependents include the employee's spouse, children, and dependent parents. Stepchildren and adopted children are considered children of the employee. Coverage of dependent children must continue up to age twenty-six (26), or if the dependent child is unable to be employed due to mental or physical impairments and is dependent on the policy owner for support, there is no age limit and coverage will continue. As with individual insurance policies, newborn children will be covered as dependents under a group insurance policy from the moment of birth.

Required Provision 9: Payment of Claims

Claims are to be paid to the policyowner, who is usually the insured. If a death benefit is provided, (as in an AD&D policy) the death benefit is payable to the designated beneficiary according to the policy provisions. The facility of payment clause may be included in the payment of claims provision. The provision states that benefits are payable to an individual who is related to the deceased insured by blood or marriage.

Required Provision 8: Time of Payment of Claims

Claims other than those providing periodic payment are payable immediately upon receipt of written proof of loss. Medical Expense claims must be paid immediately. Disability claims (which often involve periodic payments over a period of time) must be paid no less frequently than monthly. Medical Expense Claims = Paid Immediately Disability Income = Paid No Less Than Monthly

Life insurance illustrations must contain the following minimum information:

Clear label indicating the document is a life insurance illustration Insurer's name Producer's name and address Insured's name, age, and sex Date of illustration Generic name of policy Company name of policy, if applicable Form number Any dividend options or nonguaranteed elements

There are two types of vesting:

Cliff vesting and Graded vesting.

Coercion, Intimidation, and Boycott

Coercion generally manipulates through the prospect of something desirable. An agent's subtly suggested offer to recommend the prospective client for membership in a selective club if the person purchases a particular policy is coercive, for instance. Intimidation manipulates through the threat of a negative result. The loss of business and the denial of coverage are examples of intimidation. Boycott is a form of intimidation in which an individual or group refuses to do business with a company or individual, either to drive them out of business or to force them to act in certain way.

Coinsurance

Coinsurance is the agreed upon proportions (expressed as a %) for what the insurer and the insured pay for services covered by a policy. Coinsurance proportions are usually 80% for the insurer and 20% for the insured. The policy must state what benefits or services are subject to coinsurance and the proportion for which each party is responsible. Coinsurance is based on a percentage.

Mutual Insurers

Commercial insurers who are owned by their policyholders.

Reinsurers

Companies which sell insurance to other insurance companies. Reinsurers are responsible for any portion of risk assumed by the ceding insurer, reducing their exposure to loss.

All of the following are characteristics of comprehensive dental plans, EXCEPT: Select one: a. Deductibles b. Coinsurance c. Scheduled d. Usual, customary and reasonable

Comprehensive dental plans are NONscheduled and benefits are paid on a usual, customary and reasonable basis. The correct answer is: c. Scheduled

Pre-existing Conditions

Condition that occurs before you get health coverage and will not be covered. Pre-existing conditions are existing medical conditions for which the insured sought medical treatment or advice prior to policy issuance. Pre-existing conditions may be excluded from the replacing policy for a certain period of time. This means conditions for which the insured is covered under their existing policy will not be covered for a period of time on the replacing policy. The length of time pre-existing conditions may be excluded varies by type of health insurance policy and the state insurance laws regulating such policies, but the conditions are typically excluded if pre-existing for more than 18 months.

Pre-existing Conditions

Condition that occurs before you get health coverage and will not be covered. Pre-existing conditions clauses protect the insurance company from adverse selection. Pre-existing conditions are conditions or the existence of symptoms for which medical advice, diagnosis, care, or treatment was recommended or received within no more than six months before the date of the enrollment of the policy. The insured must disclose pre-existing conditions in the insurance application, and the insurer must state the limitations and exclusions for the payment of benefits for pre-existing conditions.

Conditionally Renewable Provision

Conditionally renewable policies allow the insurer the right not to renew the contract for a REASON SPECIFIED in the policy. An example of a condition is a change to a dangerous job. Policy premiums can be increased. Pending claims are eligible for payment regardless of whether or not a policy is renewed. Conditionally Renewable = Guarantees Coverage With Conditions

Modified Endowment Contracts (MECs)

Congress and the IRS have defined life insurance with guidelines for protecting the tax advantages associated with owning a life insurance policy. The rules are designed to prevent over-accumulation of policy funds that allow individuals to avoid taxation for investment activities under the guise of life insurance. Modified endowment contracts are over-funded life insurance policies in which proceeds are subject to taxation.

Premium =

Consideration

Fair Credit Reporting Act

Consumers have the right to dispute a credit report under rights provided by the Fair Credit Reporting Act.

Which of the following is true regarding the taxation of traditional IRAs? Select one: a. Contributions are made with after-tax dollars and interest earned is tax-deferred. b. Contributions are made with pre-tax dollars and interest earned is tax-deferred. c. Contributions are made with after-tax dollars, but interest is taxable in the year it is earned. d. Contributions are made with pre-tax dollars, but interest is taxable in the year it is earned.

Contributions to a traditional IRA are tax-deductible and interest is tax-deferred until withdrawal. The correct answer is: Contributions are made with pre-tax dollars and interest earned is tax-deferred.

Contributory

Contributory plans are paid by both the policyowner and the insureds, which reduces adverse selection because the insureds share in the cost of premiums. Contributory group plans require at least 75% participation of the group's eligible employees.

Decreasing Term = Falling Death Benefit Increasing Term = Rising Death Benefit

Coo.

Disability Income Insurance Premiums paid for individually owned disability income policies are not tax-deductible; however, disability income benefits are tax-free when paid with after-tax dollars. Hospital Indemnity Benefits received from a hospital indemnity plan are not taxable. Accidental Death and Dismemberment Premiums for individual accidental death and dismemberment plans are not tax deductible. Medical Expense Insurance Premiums paid for medical expense policies are tax-deductible only if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. Deductions must be itemized on the individual's tax return. Benefits are received tax-free.

Cool

Contributory = 75% Noncontributory =100%

Cool.

Longer Anticipated Lifespan = Smaller Benefit Shorter Anticipated Lifespan = Larger Benefit

Cool.

On the test you need to know that TPAs, ASOs, or Administrators are not used by a major insurance company. The test makers really focus on the self-insurance part. Since large insurers have their own internal departments to handle those functions. The question is something like this: All of the following would most likely use a TPA EXCEPT: A. The pension plan of a self-insured company. B. A self-insured health plan. C. Trust D. A large insurance company.

Correct Answer: D. On the test whichever answer does not have to do with self-insurance or outside handling is correct. Large insurers have internal divisions to handle claims and other functions. On the other hand many states and large companies hire TPAs to handle their insurance plans administration. Also note they could use the terms: ASO, Administrator, Third-Party Administrator, or TPA. They are trying to make sure you understand that self-insured companies/ organizations use an outside party to administer their plans.

Corridor Deductible

Corridor deductibles are often used for supplementary major medical plans. The corridor deductible coordinates with the basic medical plan. This is how it works: -The basic plan pays medical expenses the insured incurs. -Once the base plan benefits are exhausted, the insured will pay the full deductible. -After that, major medical benefits kick in. Example: Assume Marge has a supplementary major medical plan. Her corridor deductible is $400. The base plan portion is $3,000 and her total bill is $10,000. How is the bill split up? The $400 corridor deductible will apply after $3,000 of basic medical expense benefits, and before the major medical portion of the policy kicks in. The policy will cover the first $3,000 of the $10,000 bill. This leaves $7,000, of which Marge must pay the next $400. This leaves $6,600, which will be used to establish the coinsurance (you will learn about coinsurance later in this module).

An applicant does not have insurable interest in which family members?

Cousins, In-laws, and Similarly distant kinships.

Sam submits an application with initial premium for a life insurance policy on July 6th. The agent issues Sam a conditional receipt at this time. Sam takes the required medical exam on July 10th. The insurer approves the policy on August 1st, and the agent delivers the policy to Sam on August 10th. Which day did Sam's coverage begin?

Coverage begins at the time of the conditional receipt or medical exam, WHICHEVER IS LATER. In this case, July 10th.

health insurance

Coverage for... (1) loss of income caused by disability (2) medical expense related to illness or accidental injury (3) dental/vision expense (4) Long-term care expense (5) Targeted issues such as cancer, prescriptions, etc. Health insurance is a broad term used to describe policies that cover loss of income due to accident or sickness and health care expenses. Each state uses different terminology to refer to health insurance, such as "accident and health" or "accident and disability."

All of the following policies must have a prominent notice "THIS IS A LIMITED POLICY" printed on the policy face, EXCEPT: Select one: a. Blanket b. AD&D c. Vision d. HMO

Coverage provided by an HMO is not limited

The binding receipt (binder) or the temporary insurance agreement provides coverage from the date of the application, regardless of whether the applicant is insurable. How long does this coverage last?

Coverage usually lasts for 60 days, or until the insurer accepts or declines the coverage. In addition, coverage usually has a maximum of $1,000,000. Binding receipts are rarely used in life insurance, and are primarily used in auto and homeowner's insurance.

Binding Receipt =

Covered

Credit Insurance

Credit insurance protects against the risk that a person in debt, termed debtor, cannot repay the debt to the creditor because of accident, sickness, disability or death. Credit life and credit health insurance cover these risks.

HIPAA established a standard for communicating Protected Health Information (PHI). (Privacy.) PHI is any information concerning an individual's:

Current medical status, Prior medical history, Health status, Diagnoses, Treatments, or Payments for healthcare linked to the individual.

What action will the insurer take if the insured has misstated their age on a health insurance application? Select one: a. Void the policy and not return any premiums b. Cancel the policy and return any unearned premiums pro rata c. Adjust the premiums d. Adjust the benefits accordingly

D. Adjust the benefits accordingly A misstatement of age does not void a policy. The benefits are adjusted accordingly. All amounts payable under the policy will be modified to what the premiums would have purchased at the correct age.

Social Security quarters of coverage earned are based on ________ quarters worked, and ________ be earned consecutively. Select one: a. Consecutive; must b. Consecutive; can c. Cumulative; cannot d. Cumulative; do not need to

D. Cumulative; do not need to

Premium amounts are based on Expenses (also called "loading") of their company. These can include:

Daily expenses of operating Acquisition Costs: cost of effectuating insurance policies, of which a producer's first year commission makes up the greatest portion Overhead: insurer's salaried staff, rent, and furniture Contingency Funds: additional premium may be required if original premium is insufficient - only some insurers (i.e., assessment insurers) have the right to charge additional premium Immediate Claims Payments: insurers assume that all claims are paid at the end of the year when establishing rates, when in reality claims are paid all year

For Medicare Part A, what period of time must coinsurance be paid for a hospital stay? Select one: a. Days 1 through 60 b. Days 61 through 90 c. Days 91 through 150 d. After 150 days

Days 61 through 90 Coinsurance must be paid for days 61 through 90 of a benefit period. All approved charges are paid after daily coinsurance is paid.

The Features of Major Medical Plans include:

Deductibles = Dollar Amount for Risk Retention (I keep some risk, the company takes the rest) Coinsurance = Percentage of cost for Risk Retention Eligible Expenses Inside limits (limits placed on certain medical coverages within a policy, such as a dollar limit for room and board, or a dollar limit for X-rays) The maximum lifetime benefit (the total amount an insurer will pay on a policy for any one insured individual. Most major medical policies have maximum lifetime benefits of $1 million.) Exclusions and Limitations Restoration of Benefits (sometimes; Medical expense policy that allows the insured's maximum lifetime benefit to be restored after a large portion of benefits has been used.)

Defamation

Defamation is any false, maliciously critical, or derogatory communication - written or oral - that injures another's reputation, fame, or character. Both individuals and companies can be defamed. Most state insurance regulations state that no person or company may make, publish, or circulate an oral or written statement or circulate literature that is false, maliciously critical, or derogatory to the financial condition of any insurer or that is calculated to injure anyone engaged in the insurance business.

What does it mean to defame an insurer?

Defamation is any false, maliciously critical, or derogatory communication - written or oral - that injures another's reputation, fame, or character. Both individuals and companies can be defamed. Unethical producers practice defamation by spreading rumors or falsehoods about the character of competing producers or about the financial condition of another company. Most state insurance regulations state that no person or company may make, publish, or circulate an oral or written statements or circulate literature that is false, maliciously critical, or derogatory to the financial condition of any insurer or that is calculated to injure anyone engaged in the insurance business.

The number of years for vesting varies depending on the type of retirement plan (there are 2):

Defined benefit or Defined contribution.

Accidental Bodily Injury

Definition of accident in which the injury is unintentional and unexpected. Policies using this definition cover all injuries except self-inflicted injuries. This more liberal definition can be thought of as a "results only" test. Returning to the chair example above, a disability income policy with the accidental bodily injury test would pay benefits for the person who accidentally broke their tailbone.

Malingering

Deliberate faking of a physical or psychological disorder motivated by gain.

The premium must be collected at __________________, if not at ______________.

Delivery; Application

Delayed Payment Provision (for the insurance company)

Depending on the state, the insurance company may be permitted to delay payment of cash surrender for up to 6 months from the request. This is called the delayed payment provision and provides insurance companies a buffer if they encounter a financial crisis.

In order to obtain currently insured status, a covered worker must accrue at least six quarters of coverage over the past 13 quarters ending with the quarter in which the covered worker:

Died; Became disabled; or Became entitled to retirement benefits.

After the 5-month waiting period, Social Security disability benefits are payable to the disabled covered worker in the amount of: Select one: a. 1/4 their PIA b. 1/2 their PIA c. 3/4 their PIA d. Their total PIA

Disability income benefits are paid to the covered worker in the amount of their total PIA after a five-month waiting period. The correct answer is: Their total PIA

Which of the following is not a use of disability income insurance? Select one: a. Pay mortgage bill b. Pay credit card bill c. Pay medical expenses d. Purchase groceries

Disability income insurance is not intended to pay medical expense bills. Instead, it is designed to provide a replacement income while the insured is disabled and cannot work. The correct answer is: Pay medical expenses

Short-term Disability Income Policies

Disability income policies with benefit periods of less than two years.

Nonconfining Disability

Disability which does not restrict the insured to an indoor environment.

Confining Disability

Disability which restricts a person to staying indoors.

Discrimination

Discrimination is a necessary part of the insurance business. Underwriters must make distinctions in rates and available policies based on applicants' ages, predicted expectation of life, health hazards, and similar principles. In other words, they must consider the nature of the risk, the expense of conducting business, the propriety of the plan of insurance, and similar principles.

Distributions from a qualified plan may be made without incurring the early distribution penalty tax for all of the following reasons, EXCEPT: Select one: a. The plan participant dies. b. Distribution made to pay for a new RV. c. The plan participant incurs a disability. d. Distribution made as a qualified rollover.

Distributions made for the following reasons are not subject to the early distribution penalty tax: the plan participant dies or incurs a disability; a loan is taken from the plan; distribution made as part of a divorce decree; level payments made at least annually to the participant over their life; or a distribution made is as a qualified rollover. The answer: b. Distribution made to pay for a new RV.

Paid-up Additions

Dividend option in which the policyowner uses the dividend as a single premium to purchase an additional amount of whole life coverage. This dividend option increases the face amount of the policy.

How are personal life insurance dividends taxed? Select one: a. Interest earned on dividends is considered taxable income. b. Dividends are considered a return of overcharged premium. c. Dividends are not taxable because premiums are paid with after-tax dollars. d. All of the above

Dividends ARE considered a return of overcharged premium, and are not taxable because premiums ARE paid with after-tax dollars. Interest earned on dividends IS taxable income. The correct answer is: All of the above

Annuity Certain =

Doesn't Guarantee Life Income Unlike a life annuity, the annuity certain option does not guarantee a life income. Instead, it provides income for a fixed time period, such as 10 or 15 years. An annuity certain has a distinct beginning and end, so if income is needed for life, a life annuity is more suitable. Fixed Period Installment The fixed period installment pays periodic annuity payments to the annuitant for a stipulated period of time. Based on the annuity value at annuitization and the assumed interest rate, the insurer calculates the amount of each annuity payment. Payments stop when the period ends. Fixed Amount Installment With the fixed amount installment, a stipulated amount is paid to the annuitant periodically. The contract owner decides how much each payment will be, and the insurer determines how long payments will last based on the value of the annuity and assumed interest rate. Payments stop when the funds are depleted. Example: Mark has a 15-year fixed period installment annuity certain. Mark will receive payments for 15 years. Even if he is still alive after the 15 years, the payments stop. Lets say Mark has a fixed amount installment annuity certain that is valued at $100,000. Mark decides to receive the payment amount of $10,000 a year. Mark would receive paymetns for 10 years until the funds are depleted. Even if he is still alive after 10 years, the payments stop.

In some states, laws have been passed to extend insurable interest to:

Domestic partners and Civil unions.

Immediate Annuities =

Don't Have Accumulation Period

Which of the following is true regarding taxes on nonqualified annuities? Select one: a. Premiums are paid with pre-tax dollars and interest is tax-deferred. b. Premiums are not tax-deductible and interest is taxable in the year it is earned. c. Premiums are not tax-deductible, but interest is tax-deferred. d. Premiums are paid with pre-tax dollars, but interest is taxable in the year it is earned.

During the annuity pay-in period, premiums are not tax-deductible, but interest is tax-deferred until withdrawn. The correct answer is: c. Premiums are not tax-deductible, but interest is tax-deferred.

Which of the following statements regarding Medicare Part C coverage is true? Select one: a. Medicare Part C plans never offer prescription drug coverage. b. Medicare Part C plans never have annual deductibles. c. Each Medicare Part C plan is different, so premiums vary as a result. d. Coverage for Medicare Part D, if included in Medicare Part C, is always included in the premium.

Each Medicare Part C plan is different, so premiums vary as a result. Most Part C plans DO include prescription drug coverage. Coverage for Medicare Part D may be charged separately if included in the plan. Some Medicare Part C plans charge an annual deductible. Each Medicare Part C plan is different, and premiums vary as a result. That's TRUE! Medicare Part C plans charge a combined premium for Medicare Parts A and B.

Reciprocal exchanges, also referred to as interinsurance exchanges or simply reciprocals, are unincorporated groups of individuals.

Each individual member, called a subscriber, provides insurance for other members through indemnity contracts. Each subscriber acts as both the insurer and the insured. A separate account is set up for each subscriber to which premiums are paid and losses are assessed. Each subscriber's loss is shared among all subscribers in the reciprocal. An attorney-in-fact functions as the administrator of the reciprocal exchange by underwriting coverage, handling premiums, plan membership, sales and claims. Examples of reciprocal exchanges are USAA and Farmers Insurance Group.

Free Look

Each insurance policy must provide notice that during the period of 10 days FROM the date of delivery to the policyowner, such policy may be returned for cancellation to the insurer. The insurer will refund all premiums paid, including any policy fees or other charges, and the policy will be deemed void, as if no policy had been issued. Most states require by law that all individual health insurance policies contain a free look period. Some states have a 30 day Free Look from date of delivery for Long-term Care and Medicare Supplement policies.

In a universal life insurance policy, the two most common adjustments made during a month are: Select one: a. Decrease premium and increase death benefit b. Shorten premium-paying period and decrease premium c. Lengthen premium-paying period and increase death benefit d. Cost of death protection deducted and current interest rate credited

Each month, the cost of the death protection is deducted from the cash value, and the current interest rate is credited. The correct answer is: d. Cost of death protection deducted and current interest rate credited

How do HIV and AIDS figure into insurance?

Each state has its own laws regarding HIV testing. However, most states allow insurers to include a question on the application asking if the applicant has tested positive for AIDS. Insurers are also permitted to request applicants undergo an HIV test as part of the application requirements, at the insurer's expense. This is typical of life insurance with higher face amounts. The requirement is fair as long as all individuals of a class are required to undergo the test, and the test is in compliance with all state and federal laws. Insurers cannot target a population based on sexual orientation, marital status or geographic location as the basis for an HIV test. In some states, an insurer may be permitted to deny coverage based on a positive HIV test; however, coverage issued to individuals who have tested positive for HIV cannot contain special policy limits or exclusions for losses due to HIV or AIDS. Insureds must sign a consent form before the HIV test may be performed. HIV test results are confidential, and the insured must sign a release form if the results are to be disclosed to a non-entitled party. If there is a positive result, the applicant and the insurer's underwriter will be notified. If the applicant has not indicated a physician to receive positive test results, then the state Department of Health will receive the information, including the name and address of the lab reporting the results. Insurers may provide HIV test information to the MIB, but may only indicate that the insured has "abnormal blood test results."

Medicaid is operated on the: Select one: a. Federal level b. Local level c. State level d. None of the above

Each state operates its own Medicaid program through its Department of Public Welfare. However, states must comply with federal regulations and guidelines. The correct answer is: State level

Prohibited Policy Provisions

Each state's law determines the policies and provisions allowed, required, and prohibited. Additionally, each state has a minimum standard for health insurance coverage, and policy provisions that reduce coverage below that minimum are prohibited.

Eligible Expenses

Eligible expenses are the types of benefits or services provided under the policy coverage. The policy must state the types of benefits and services covered and the conditions and limitation on the coverage.

Embezzlement

Embezzlement = Producer Using Insureds Money It is both fraud and theft.

How does emergency care work with an HMO?

Emergency Care Provisions In- and Out-of-Area emergency services, including medically necessary ambulance services, usually must be available at the HMO clinic on an inpatient or an outpatient basis 24 hours a day, seven days a week. Out-of-Area emergency services may be excluded, however, though patients may purchase the service as a supplement. A subscriber who needs emergency care while on business or vacationing out of the HMO area can usually qualify for the benefit. Also, if a subscriber needs to use an urgent care facility in a critical emergency situation, those services will be covered. However, if a subscriber is within the HMO area and uses a non-HMO emergency room, the services received will not be covered.

What qualified plan resembles a profit-sharing plan, in which the employer establishes a trust fund and uses cash or new shares of stock to purchase existing shares? Select one: a. Keogh b. ESOP c. SIMPLE d. SEP

Employee stock ownership plans (ESOPs) are employee benefit plans. ESOPs are similar to profit-sharing plans. Here's how an ESOP works: the employer establishes a trust fund, and uses cash or new shares of its stock to purchase existing shares. The correct answer is: b. ESOP

Which of the following is false regarding federal taxation of qualified plans? Select one: a. Interest is taxable in the year earned. b. Contributions made by the employer are tax-deductible. c. Interest is tax-deferred d. Employee contributions are made with pretax dollars

Employer and employee contributions to qualified plans are tax-deductible, and accumulated earnings of the plan are tax-deferred until withdrawal. The answer is: a. Interest is taxable in the year earned, because it's false--the interest is in fact tax deferred.

Employer group health plans must provide primary coverage to individuals with end stage renal disease for 30 months, after which Medicare provides ______ coverage. Select one: a. Primary b. Secondary c. No d. Tertiary

Employer group health plans must provide primary coverage to individuals with end stage renal disease (ESRD) for 30 months, after which Medicare provides primary coverage. The correct answer is: Primary

Employer group health plans that have 100 or more enrolled employees are required to provide primary disability coverage for disabled employees who are below the age of ____ and have not retired. Select one: a. 40 b. 59 1/2 c. 65 d. 75

Employer group health plans that have 100 or more enrolled employees are required to provide primary disability coverage for disabled employees who are below the age of 65 and have not retired. The correct answer is: 65

Which policy works the same way as universal life, but has an interest rate that is tied to the stock market index? Select one: a. Equity indexed universal life b. Adjustable life c. Flexible premium adjustable life insurance d. Universal life

Equity indexed universal life works the same way as universal life insurance except the interest rate is tied to the stock market index which has the potential to offer greater cash value growth than universal life insurance. The correct answer is: a. Equity indexed universal life

Why buy life insurance? (Think investing)

Estate Creation and Conservation Life insurance creates an immediate estate. Estates may be created in other ways, such as through savings and investments, but if such methods are not effective or time does not permit, life insurance can assume the role of estate creation. For example, an investment fund may take years to grow; whereas, a life insurance policy purchased today creates an immediate estate in a minimum amount of at least the initial premium. This fund can also be used to pay for Estate and inheritance taxes, Probate fees and Estate administration.

OASDI Examples Someone makes 50,000 in a year. How much do they pay for OASDI taxes and Medicare Tax? What about someone who makes $200,000?

Example: An employed person who earned $50,000 The individual would pay $3,100 for OASDI taxes ($50,000 × .062 = $3,100) and $725 ($50,000 x .0145 = $725) for Medicare tax. Notice this person's full earnings were subject to FICA tax. Example: Suppose a person earned $200,000 Only the first $128,400 is subject to the OASDI portion of FICA taxes. However, the entire earnings are subject to Medicare tax because there is not a maximum taxable wage cap for Medicare taxes. The individual would pay $7,960.80 for OASDI taxes ($128,400 × .062 = $7,960.80) and $2900 for Medicare taxes.

Who is exempt from CE requirements in the state of Connecticut?

Exemptions Producers who become Connecticut residents and are granted a license based on their previous home state licensure will not be required to complete CE during the initial biennium. Producers who hold licenses in states requiring CE for their insurance producers and who provide evidence of compliance with those CE requirements in such state are exempt from meeting CT's CE requirements. Producers whose only line of authority is credit insurance, mortgage guaranty, or travel accident and travel baggage are exempt from the 24-hour CE requirement.

There are four pieces of information that are used to determine the proper amount of personal life insurance:

Expenses, Maintenance income, Debts/mortgages, and Dependent children's education.

Expense Ratio =

Expenses/Premiums

There are two ways of rating group policies:

Experience Rating - group premiums established on the group's prior claims history. Experience rating more accurately rates the group; however, groups with more claims will inevitably pay higher premiums. Community Rating - premiums are based on the actual or projected costs of insureds in a particular geographic location with reference to insureds' age, gender, occupation, and health. With community rating, each member pays the same premium.

If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and:

Explains its provisions, Secures the initial premium payment, and a signed letter of continued good health

A person who is covered by Social Security is currently participating in Social Security by paying _____________, regardless of whether the person is eligible for benefits.

FICA payroll taxes

What happens if I fail to comply with the CE requirements in the state of CT?

Failure of a producer to satisfy the CE requirements by the last day of the biennium will result in nonrenewal of his license, unless the producer is granted an extension. Producers who have not received an extension will receive a 30-day notice from the Commissioner. If the producer does not comply with CE requirements during this period, then his license will expire.

Examples of Peril in P&C Insurance

Fire, wind, flood, hail, collision, and explosion, to name a few.

Group Policy Termination If an employer discontinues premium payments, the group life policy will be terminated. In order to terminate the group life insurance policy, the insurance company must notify the employer of the policy's cancellation and then the employer must notify its employees of the cancellation. If the master policy is terminated, each individual member who has been insured under the group contract for at least ______________ years is permitted to convert the group coverage to ____________________________. The converted coverage will have a face value at least equivalent to that provided under the group policy, less the amount of any new coverage purchased during the conversion period, or $10,000, whichever is less. Individuals must apply for policy conversion within ___________________ of the master policy cancellation.

Five years; individual whole life coverage; one month

Which of the following statements regarding the amount of each annuity payment is true? Select one: a. The younger the annuitant is, the higher the annuity payment. b. Fixed annuities have variable annuity payments. c. Variable annuities have fixed annuity payments. d. Women typically receive lower annuity payments.

Fixed annuities (annuities with a fixed interest rate) pay fixed annuity payments, and variable annuities pay variable annuity payments. The older the annuitant is, the more likely the annuitant is to die, so the higher the annuity payment. This is the reverse logic of life insurance: the longer the annuitant is expected to live, the lower the annuity payment. Because women are expected to live longer than men, the annuity payment for women will be lower. The correct answer is: d. Women typically receive lower annuity payments.

FPDA

Flexible Premium Deferred Annuity Example: Their sister Diane, has 5 children, and lots of unplanned expenses. Therefore, she chose to invest her inherited money in a FPDA (flexible premium deferred annuity). This allows her to build her annuity over time - and vary the (dollar) amount of her premiums for her periodic payments based on the availability of her funds.

What is COBRA? What are State Coverage Continuation Acts?

Following the Consolidated Omnibus Budget Reconciliation Act (COBRA) enacted by Congress, federal and state governments have enacted a number of laws protecting coverage of insured individuals when employment is terminated. Large employers are covered under COBRA, which requires that employees be allowed to continue group coverage when terminating employment. Various states have enacted Health Insurance Coverage Continuation Acts, which cover small employers with 20 employees or less and allow these small groups access to continuation of coverage provisions. In essence: individuals and their dependents to continue their group health coverage after a qualifying event (termination of employment or reduction of hours) for up to 18 months. Covered dependents are eligible for coverage up to 36 months if the insured's coverage is terminated due to: Death, Divorce, Legal separation, The insured became eligible for coverage under Medicare, or The dependent loses dependency status.

Which of the following statements is true regarding key person disability income insurance? Select one: a. Premiums are not tax-deductible, but benefits are received tax-free. b. Premiums are tax-deductible, but benefits are taxable. c. Premiums are tax-deductible and benefits are tax-free. d. Premiums are not tax-deductible and benefits are taxable.

For Key Person diability income policies, you pay tax on the way in. a. Premiums are not tax-deductible, but benefits are received tax-free. A business cannot deduct the premiums for key person disability income insurance, but the benefits are received tax-free.

Life Expectancy Contract

For a life expectancy term insurance contract, the number of years that the term policy will be in force is determined by the average life expectancy for insured's age and sex classification.

Use an example to explain the law of large numbers

For example, A group of 100,000 non-smoking males ages 30-35 provides much better loss predictions than a group of 100,000 males and females, of all ages, where some smoke and others don't. Therefore, larger groups consisting of similar individuals provide more accurate mortality or morbidity projections.

What are the perks of Term Life Insurance?

For insurers: -For most people term insurance is temporary protection that cannot be renewed beyond a certain age, such as 75. -The insurer is betting the insured will live beyond the policy period, so the death benefit will not be paid out. For consumers: -Term insurance provides the largest amount of coverage for the least amount of premium. -Term insurance is appropriate for a person wanting to insure a short-term or long-term debt, such as a car loan or mortgage, respectively. -Term insurance is also appropriate for young families or young professionals who require a large amount of coverage, but cannot afford the larger premiums of permanent insurance until later on when their financials are more established

What does getting your benefits look like with health insurance?

For medical expense contracts, benefits are paid on a reimbursement basis, meaning the benefit is based on the amount of loss incurred. On the other hand, benefits for life insurance, AD&D, and disability income policies are paid on a valued basis - a stated amount is paid.

What can insurance brokers do to allow consumers to be sure that they have chosen correct replacement coverage for LTC or Medicare Supplement policies?

For replacement transactions involving LTC and Medicare Supplement policies, the agent must provide the applicant a... -Notice Regarding Replacement, which explains the replacing coverage in comparison to the existing coverage. Included in the Notice, the applicant must be provided a 30-day free look period for the replacing coverage. 30 Day = Free Look for LTC Replacements

Which medical savings plan is a combination of a savings account and a high deductible, where contributions are made by the plan participants and funds from the prior year may be rolled over into the following year? Select one: a. HRA b. FSA c. HSA d. All of the above

Funds in an HSA can be rolled over from year to year. The correct answer is: HSA

What is taxable when it comes to life insurance?

Generally, life insurance benefits paid to a beneficiary are tax-free. However, interest earned on reinvested policy proceeds is subject to tax, because installment payments contain interest, which is taxable. Likewise, dividends are not taxable because they are a return of overcharged premium; however, if the dividend is reinvested with the insurer, any growth earned on the dividend (interest) is taxable. In summary: interest is taxable, the rest is not.

Who is eligible for Medicare?

Generally... -Medicare is available to people ages 65 or older that are U.S citizens OR -Have been continuous permanent legal residents for at least 5 consecutive years. -Eligible individuals or their spouses MUST have paid Medicare taxes for a minimum of 10 years. People of ANY AGE can qualify for Medicare coverage for the following: -Be disabled and receive Social Security disability or RRB (Railroad Retirement Board) disability benefits for two years or more, -Be a dependent of someone who is eligible for social security benefits, -Have ESRD, requiring ongoing dialysis or a kidney transplant and be eligible for social security disability benefits, or -Have Lou Gehrig's disease and qualify for social security disability benefits.

Use an Example of a Creditor-Debtor Relationship that warrants insurable interest.

George borrowed money from a finance company. The company has a credit life insurance policy that would cover George's debt if anything happened to him.

Gerald wants a life insurance policy in which he can choose the investment vehicle. Which policy would you recommend to him? Select one: a. Ordinary whole b. Variable life c. Universal life d. Adjustable life

Gerald would be able to choose where he wants his premiums invested with a variable life insurance policy. The correct answer is: b. Variable life

Group health insurance policy rates are usually based on: Select one: a. Experience rating b. Community rating c. Individual rating d. None of the above

Group health insurance policy rates are usually based on experience rating in which premiums are based on the claims experience of the entire group. The correct answer is: a. Experience rating

Conversion Privilege

Group health plans must provide the right of all eligible persons covered under the group policy to convert to an individual policy without evidence of insurability. Conversion privileges are effective if the person was terminated for any reason except involuntary termination for cause, lost coverage due to the entire class of coverage being discontinued, or the insured's dependent child reaches an age where coverage terminates. Policies may require the individual to have been covered continuously for a set period of time, often no more than three months. Coverage provided by a conversion policy usually provides benefits most similar to that provided under the group policy; however, the person may elect a lesser form of coverage. Conversion must be made within 31 days of ineligibility in the group plan.

Group Plan Characteristics

Group insurance provides insurance for many people under one master contract. The group is underwritten as a whole, not each individual. Each member insured under the group plan is issued a certificate of insurance as evidence of coverage. Members insured under the group plan are not party to the contract, only the insurance company and the group entity are. Group insurance, as compared to individual insurance policies, has the following distinctions: More people are covered by a group plan through their employer than by an individual insurance plan. It is typically easier to qualify for a group plan than an individual plan. The unit cost for group insurance is generally less than for a comparable individual plan.

What are the requirements of group life insurance?

Groups must exist for reasons other than simply to obtain insurance coverage. In addition, groups must have a minimum number of enrollees due to the fact that larger groups provide better loss projection. Almost half of all life insurance issued is group life. Group life is differentiated from individual life in that enrollees typically do not have to provide evidence of insurability, are not issued individual policies, and do not own the contract.

Under HIPAA an insurance company may look back how far on pre-existing conditions for a late enrollee? Select one: a. 6 months b. 12 months c. 18 months d. 24 months

HIPAA allows the insurance company to look back 18 months for pre-existing conditions for LATE ENROLLMENTS. For new hires it is 12 months.

Health Insurance Portability and Accountability Act (HIPAA) Requirements

HIPAA was passed by Congress in 1996 to protect the coverage of individuals and their families when they change or lose their jobs. HIPAA also established privacy standards for individuals. As a federal law, HIPAA applies to groups with 50 or more employees. However, most states have their own version of HIPAA regulations that now protect small employer groups with as little as 2 employees.

Blue organizations are most often provided as _____, _____, or _____ plans.

HMO, PPO, or POS POS (point-of-service) plans allow plan participants to receive care from participating or nonparticipating providers.

What are the Supplementary Coverages and Exclusions/Limitations for HMOs?

HMOs are not required to (but may) provide the following supplementary health care services: Vision Dental Prescription drugs Home health care Long-term care

HMO does what?

HMOs provide the medical care and finances required to fund health care services. Subscribers obtain medical care through hospitals and physicians that have contracted with the HMO.

Two common types of service providers are:

HMOs- Health Maintenance Organizations, and PPOs- Preferred Provider Organizations.

Deferred Annuities =

Have an Accumulation Period

The three most important Managed Care Models are:

Health Maintenance Organization (HMO) Preferred Provider Organization (PPO) Point-of-service Plan (POS)

How do special savings plans get taxed by the feds?

Health Savings Account (HSA) By contributing to an HSA, plan participants reduce their adjustable gross income, lowering their tax responsibilities. Contributions to an HSA are made on a pre-tax basis, and interest grows tax-deferred. Tax-free withdrawals can be made from an HSA for: Physician's expenses, Dental fees, Prescription drugs, Contacts, Eyeglasses, Lab expenses, Nursing home expenses, and Other qualifying expenses. Health Reimbursement Account (HRA) Employer contributions to a health reimbursement account (HRA) are tax-deductible as a business expense and are not part of the employee's taxable income. Benefits are received tax-free. Flexible Spending Account (FSA) Employees deduct pre-tax dollars from their income earnings and deposit them in an employer-sponsored flexible spending account (FSA). Employees submit receipts for eligible medical expenses for reimbursement up to the annual maximum. Consumer-driven Plans Consumer-driven healthcare plans combine the use of HSAs and HRAs to pay for routine medical expenses and high-deductible coverage. Eligible HSA withdrawals and HRA reimbursements are non-taxable. Additional out-of-pocket deductibles paid by the insured are tax-deductible as applied to the federal medical expense deduction for medical expenses exceeding 10% of the individual's adjusted gross income. Benefits are received tax-free.

Managed Care

Health coverage centered on cost containment. The purpose of managed care is simple: provide good medical care at affordable cost through monitoring all aspects of treatment. Traditional health insurances cover the costs of accident and sickness. When an insured becomes ill or has an accident, they go to the doctor of their choice. Their doctor might send them to a hospital of their choice for treatment. At the end of the treatment, the insured will either pay the hospital and be indemnified for most of the cost by their insurer, or the insured will assign the benefits to their health providers and the insurer pays them directly. In the late twentieth century, escalating medical costs put this kind of insurance beyond the financial reach of many Americans. New models for dealing with the expenses of medical care were created to provide affordable health care coverage for a wide range of people.

Health Insurance

Health insurance is designed to protect against the severity of financial loss due to illness, disease, short or long-term disability, wages lost while ill or disabled, and medical expenses.

Determining "Needs" for Health Insurance

Health insurance needs are based on a person and their dependents' expected medical expenses. Producers are responsible for helping applicants choose suitable health insurance coverage. Employer-sponsored coverage and eligibility for social insurance should be incorporated into choosing coverage.

Participation in Health Insurance

Health insurance policies can be participating or nonparticipating; however, most individual policies are issued as nonparticipating. Group policies are often participating. Participating means the policyholder receives shares/dividends of the company surplus.

Optionally Renewable

Health insurance policy providing the insurer the right to not renew the policy for any reason and allowing the insurer to increase premium rates.

Conditionally Renewable

Health insurance policy providing the insurer the right to not renew the policy for any reason specified in the policy and allowing the insurer to increase premium rates.

PPO (Preferred Provider Organization)

Health insurance that makes it easier to see out-of-network doctors. The Preferred Provider Organization evolved out of the HMO model. It offers the patient more choices in doctors and medical facilities than an HMO offers. A PPO is a managed-care arrangement under which a selected group of independent hospitals and medical practitioners in an area, such as a state, agrees to provide a range of services at a prearranged cost. The organizer or contracting agency of a PPO might be one of a number of groups. Examples include: -Large employers -Trade unions -BlueCross BlueShield groups -Traditional insurance companies -Local groups of hospitals

Blanket Plans

Health plans that insure a group of individuals participating in the same activity, such as a group of high school seniors going on a class trip, or a soccer team.

Higher Risk =

Higher Premium

Short Elimination Periods = _________ Premiums

Higher Premiums

The steps of transacting insurance.

I, an insurance producer will meet with a consumer to present options for coverage based on their stated goals and needs. They, the applicant, will apply for the policy with me, completing as much detailed info as possible. I submit the application on behalf of the consumer. An underwriter for the relevant insurance carrier will confirm the insurability of the consumer, evaluate information about the applicant and Select a risk classification and premium rate that matches the degree of risk undertaken. After the application clears underwriting, the insurer will issue the policy for delivery, and I, the insurance producer, will deliver the policy to the policyowner.

IOLI

IOLI = Third-Party Ownership Investor-originated life insurance (IOLI) is a type of STOLI. With IOLI, investors solicit elderly people to purchase life insurance, and an agent or broker agrees to loan insureds money to pay the premiums for a period of time, with the agreement that after two years of paying premiums the investors become the policyowners, and receive the policy death benefits upon the insured's death. Investors supply funds to a "pool" of STOLI-type policies with the expectation that the insureds die very soon, so that they earn a profit on the death benefit. In most cases, the lender is the investor, who uses the STOLI policy as collateral on the loan. If the insured dies during the 2-year loan period, the investor/stranger repays the loan and then receives the death benefit. If the insured is alive after the 2-year loan period, the policy is sold to investors in an amount that is greater than the policy's cash value, but less than its death benefit. In exchange, the insured receives a nominal lump sum payment for essentially facilitating a third party's profit upon their upcoming death. STOLI and IOLI are ethical dilemmas because the investor or stranger does not have insurable interest in the continued life and wellbeing of the insured. They want the insured to die very soon, so that they will receive the policy death benefits. Often times, once the policy has been sold to a stranger/investor, the insured will be contacted several times a year to see if he/she has died.

Mindy became disabled while a group policy was in force. When the policy was terminated, which of the following is a responsibility of the insurer? Select one: a. Extension of benefits b. Offer conversion to an individual policy c. Both of the above d. None of the above

If Mindy was disabled prior to the termination of the group policy, benefits can be extended, and she must be offered the opportunity to convert to an individual policy. c. Both of the above

Workers' Compensation (Common Exclusions or Restrictions)

If Worker's Comp would covered, the health insurance policy doesn't have to. They might limit or exclude related coverage. Most health insurance policies limit or exclude coverage for sickness or injury of the insured that would otherwise be covered by Workers' Compensation. Workers' Compensation is insurance that states require employers to carry for their employees. Workers' Compensation covers medical expenses and disability income, accidental injury and sickness employees incur as a result of employment. Depending on the state, and the insured's policy, the insurer may be required to provide coverage not met by Workers' Compensation. Workers' Compensation = Work Related

What is the HIPAA gap?

If a gap in creditable coverage of more than 63 days occurs, the new employer coverage can impose a waiting period. A worker with group health coverage who becomes self-employed must be eligible for coverage. HIPAA GAP = 63 Days

Rules for Total Disability

If a group policy requires members to be active within the group, then those who become totally disabled will be allowed to continue their group coverage for a maximum of six months after the onset of the total disability. The disabled insured must pay the premium, and the premium cannot be changed.

Required Provision 4: Reinstatement

If a policy lapses for failure to pay premiums and the insurer does not require an application to reinstate the policy, the insurer will reinstate the policy upon payment of a subsequent premium. However, if the insurer requires an application to reinstate the policy, a person must submit an application, which the insurer may approve or deny. The insurer may also require the person to pay up to a maximum of 60 days of back due premiums and provide proof of insurability. The insurer must issue a conditional receipt to the applicant. The insurer will reinstate the policy upon the 45th day after the date of the conditional receipt, unless the application is denied. The reinstated policy will cover accidents immediately upon reinstatement, but will not cover sickness until 10 days have passed from the date of reinstatement. 60 Days = Days of Back Due Premiums the Insurer Can Collect 45th Day = Days the Insurer has to Decide to Reinstate 10 Days = Coverage Begins for Sickness Immediately = Coverage Begins for Accident

If an agent commits an unfair practice, the Commissioner may order: Select one: a. Restitution of any sums b. Seizure of any gains c. An arrest warrant d. Jail time

If an agent commits an unfair practice, the Commissioner may order restitution of any sums shown to have been obtained in violation. The correct answer is: Restitution of any sums

Rejected Business Rule

If an agent turns in an application to his/her standard company and the company declines to issue the policy standard, the rejected business rule allows the agent to then go to another company to issue the policy. The agent does not need to be appointed by the second company in order to the get the policy issued for his or her client and can also be paid a commission.

What term describes the situation where an employer changes group plan coverage to another insurer, and all employees eligible for coverage by the old plan are automatically covered under the new plan without any probationary period? Select one: a. Persistency b. Rollover c. No-loss no-gain d. Rating

If an employer changes group plan coverage to another insurer, all employees eligible for coverage by the old plan are automatically covered under the new plan without any probationary period. This is referred to as no-loss no-gain. The correct answer is: c. No-loss no-gain

What is the maximum amount that the Connecticut Life and Health Guaranty Association will pay to a person for a life insurance death benefit from an insolvent insurer? Select one: a. $100,000 b. $200,000 c. $300,000 d. $500,000

If an insurance company should fail, the maximum amount of protection provided by the association is as follows: Life insurance death benefit: $500,000 per insured life Life insurance cash surrender: $500,000 per insured life Health insurance benefit: $500,000 per insured life Annuity benefits (Present Value): $500,000 per contract owner In addition, no individual may receive aggregate benefits totaling more than $500,000 with respect to any one life.

Optional Provision 3: Other Insurance with this Insurer

If an insured has accident or sickness policies with one insurer in which the total indemnity for certain type(s) of coverage exceeds the policy's maximum, the excess insurance will be void and all premiums paid for such excess coverage will be returned to the insured or to the insured's estate. The purpose of this provision is to prevent the insured from making a profit by seeking medical care and filing claims. In these cases, the insured is unnecessarily over-insured. Example: Marie has two health/accident policies with Acme Insurance. She breaks her ankle and her wrist when she falls stepping off a ladder in her house when she was hanging wallpaper. The costs for the ambulance, emergency room, orthopedic doctor to set her ankle and her wrist, and the boot she was required to wear for 6 weeks came to $9,000. Both of her policies pay up to $10,000 for such an injury. Because her policies contain the Other Insurance with this Insurer provision, she cannot claim $9,000 with each policy - thereby making a $9,000 profit from her accident. When the dual coverage is discovered, the insurer would most likely void the second policy and return her premiums.

When my LTC pays out, is that taxable income?

If it's qualified, no. Individually owned qualified LTC plan premiums can be deducted based on age. Benefits are NOT taxable. A LTC policy must meet the following qualifications to be defined as a qualified LTC plan: -Individual must be unable to perform at least two ADLs -Must be severely cognitively impaired -Individual must require LTC for at least 90 days -A plan of care for the individual must be provided by a physician or other licensed medical practitioner -Coverage cannot reimburse insureds for medical expenses or services covered by Medicare -Nonforfeiture options and inflation protection must be provided -Policies cannot accrue cash value

Life insurance proceeds are paid to the beneficiary upon the insured's death. Are these taxable?

If lump sum, then no, the proceeds are tax-free! If received in installments, then yes, the proceeds are subject to tax because the death benefit is reinvested into an annuity that grows interest. Each payment contains principal (the death benefit) and interest. The interest-portion of each payment is taxable. But either way, the principal portion of the death benefit is NOT TAXED.

Straight Life Income Option (Life Annuity)

If no guarantee is desired, the life annuity payout option is straight life, also referred to as life only or pure life. The annuitant receives annuity payments for their entire life. Upon the annuitant's death, the annuity payments stop. The insurer retains any balance on the annuity. The balance of the annuity forfeited to the insurer is then used to pay benefits to annuitants who live longer than expected. The straight life option is a win-lose scenario. Example: The good news - a win - if an annuitant is alive after depleting the annuity funds, the insurer will have to pay annuity payments out-of-pocket. Example: The bad news - you lose - if an annuitant dies after receiving only one or two annuity payments, the insurer keeps the remaining balance of the annuity.

Optional Provision 2: Misstatement of Age

If the age of the insured has been misstated, all amounts payable under the policy will be modified to that which the premiums would have purchased at the correct age. A misstatement of age does not void the policy. The benefits are adjusted accordingly.

Invitation to Offer

If the applicant submits the application to the insurer without the initial premium.

There is some risk inherent in the life income option. Describe this.

If the beneficiary lives well beyond their expected lifespan, the insurer must pay out-of-pocket after the principal has been depleted. However, if the beneficiary dies earlier than expected, the balance of the principal is forfeited to the insurer. Because of the risk involved with the life income option, insurers provide additional options to ensure that part or all of the policy proceeds are disbursed. These additional guarantees lower the amount of the payments.

Optional Provision 5: Insurance with Other Insurers - Not Expense-incurred

If the insured has other valid coverage providing benefits for the SAME LOSS on a basis OTHER THAN expense-incurred and the insurer was not given written notice prior to the loss, each insurer is only liable for the proportionate share of the loss, and the insurer will return the premiums on a pro rata basis. Example: What if Marie broke her ankle when she was involved in a car accident where she was not at fault? She did not actually incur any expenses when having her ankle treated because the insurance of the at-fault driver covered her expenses. She does however, have receipts for the treatments she received. Because her individual policy contains the Insurance with Other Insurers - Not Expense-incurred provision, she cannot submit those expenses as a claim. Again - she is not allowed to 'profit' from her experience. Remember that 'not-expense-incurred' usually involves a third-party.

Optional Provision 4: Insurance with Other Insurers - Expense-incurred

If the insured has other valid coverage providing benefits for the SAME LOSS on an expense-incurred basis and the insurer was not given written notice prior to the loss, each insurer is only liable for the proportionate share of the loss, and the insurer will return the premiums on a pro rata basis. Example: What if Marie had two health/accident policies - one with Acme Insurance and the other with Global Insurance? She breaks her ankle and her wrist when she falls stepping off a ladder in her house when she was hanging wallpaper. The costs for the ambulance, emergency room, orthopedic doctor to set her ankle and her wrist, and the boot she was required to wear for 6 weeks came to $9,000. Both of her policies pay up to $10,000 for such an injury. Test Point: The Insured can't make money from insurance. Protects Insurer from Over insurance!

Optional Provision 1: Change of Occupation

If the insured is injured or contracts sickness after having changed occupations to one classified as more hazardous than that stated in the policy, the insurer must pay ONLY the portion of the indemnities provided in the policy as the premium paid would have purchased AT THE RATES and WITHIN THE LIMITS fixed by the insurer for such hazardous occupation. If the insured's occupation is less hazardous than that stated in the policy, the insurer will reduce the premium rate accordingly and will return the excess unearned pro rata premium from the date of change of occupation or the policy anniversary date, whichever is the more recent. The change of occupation provision is particularly important in disability income policies in which the insured receives a portion of their earnings during disability. In other words... Change of Occupation = Premium Changes According To Job

Cash Surrender Value (relates to Permanent Life Insurance Policies only)

If the policyowner decides to stop paying premiums, they have the option of cashing out the policy for its cash surrender value.

How do I know if I am in danger of doing too much controlled business?

If the premiums on policies intended to be written do not exceed 9 times the premiums on policies written by the producer on controlled business, it must be conclusively presumed that the license is intended solely for controlled business.

Impairment Rider

Impairment riders exclude coverage for a specific condition that would otherwise be covered under the policy. Impairment riders are often attached to policies when the insured has an existing or chronic medical condition. The rider allows the insurer to cover individuals with existing or chronic conditions who would otherwise be denied coverage, while protecting its own interest in risk management.

Implied Authority

Implied authority is not specifically expressed by the principal to the agent in the agency contract, but is implicit in the agent's duties. Implied authority is authority that the agent is presumed to have as part of their ability to transact insurance. Example: An example of implied authority is collecting premiums from insureds, which may not be explicitly stated in the agency agreement, but is implied to be part of the agent's duties.

All of the following are characteristics of disability buy-sell policies, EXCEPT: Select one: a. Disability buy-sell policies are used to transfer ownership when a business owner becomes disabled. b. The business owner has ownership of the policy, but the business pays the premiums and receives the benefits. c. The elimination period is 1 to 2 years. d. Benefits may be paid monthly or in a lump-sum.

In a disability buy-sell policy, think "the BUSINESS, the BUSINESS, the BUSINESS." The business owner (1) has ownership of the policy, the business (2) pays the premiums and (3) receives the benefits. A disability buy-sell policy is used to establish how ownership in a business is transferred upon an owner's disability. The business owns the policy, pays premiums and receives the benefits. The benefit is used by the business to purchase the disabled owner's share in the business. The elimination period in Buy-Sell policies are one to two years. The benefits may be paid in monthly periodic payments or in a lump-sum.

Which of the following qualified plans uses employer contributions to a pension plan based on the employee's compensation and years of service with the company? Select one: a. Pension plan b. Target benefit pension plan c. Money-purchase pension plan d. All of the above

In a pension plan, employer contributions are based on the employee's compensation and years of service with the company, not the company's profitability or the employer's preference. Money-purchase and target benefit are types of pension plans. The correct answer is: d. All of the above

What is absolute assignment?

In a word, "permanent." An absolute or complete assignment occurs when the policyowner assigns all rights - including cash values - to another person or entity permanently. Absolute assignment means the policyowner has surrendered all rights, and the assignee, in essence, becomes the new policyowner. The original policyowner typically cannot reclaim any rights, and the assignment is permanent. The assignee does not need to have insurable interest in the life of the insured. Usually the only right that the original policyowner retains is the right to continue to pay premiums. Absolute assignments are made willingly, so they are also called voluntary assignments. An example of absolute assignment is making a gift of life insurance to a charitable organization.

What is collateral assignment?

In a word, "temporary." A collateral or partial assignment is the partial and temporary transfer of rights to another person or entity. Collateral assignments are usually intended for securing a loan. Once the policyowner pays off the loan, the policyowner resumes the partially assigned rights. Instead of purchasing a credit life policy, policyowners may make a collateral assignment of their existing life insurance coverage to secure a loan. Collateral assignments are also called conditional, because in order for the assignee to receive the portion of policy proceeds assigned, there must be a balance on the loan at the time of the insured's death.

How do EHBs and AVs help consumers compare and choose health plans?

In addition to providing Essential Health Benefits (EHBs), all non-grandfathered health insurance plans must meet specific actuarial values, or AVs: 60% for a bronze plan 70% for a silver plan 80% for a gold plan 90% for a platinum plan These AVs are called "metal levels" and will assist consumers in comparing and selecting health plans by allowing a potential enrollee to compare the relative payment generosity of available plans. Taken together, EHB and AV will significantly increase consumers' ability to compare and make an informed choice about health plans.

Gap in Coverage

In health insurance policy replacement, producers should be sure there is no gap in coverage. This means that the replacement policy's effective date is the same date that the existing policy coverage ends.

Premium amounts are based on Interest. What does this mean?

In health insurance, premiums are paid in advance before a claim is made. These premiums are invested to earn interest. Higher interest rates allow insurers to charge lower premiums.

Insureds Versus Subscribers/Participants

In health insurance, there are two different terms used to identify the person who is insured by the policy. Insured-The term insured refers to individuals who are covered by non-prepaid health plans. Subscriber-The term subscriber or participant/member refers to individuals who receive health insurance benefits on prepaid or service plans.

Insurance Contract

In its most basic form an insurance contract is an agreement made between an insurance company and an individual. The company promises to pay the individual if an unexpected loss occurs, in exchange for regular payments. The insurance company legally agrees to pay the insured in the event of a covered loss based on the terms and conditions in the policy.

Assignment (as a Condition of a Policy)

In medical expense insurance, the term assignment does not mean a transfer of ownership; instead it is a transfer of benefits from the policyowner to the medical provider. Under this arrangement, the insurer pays benefits directly to the medical providers (as if they were meant to receive the benefits). Assignment = Transfer of Benefits (or Payout of Benefits)

In the event an action to recover the proceeds due under an endowment contract is commenced and results in a judgment against the insurer, interest must be paid from: Select one: a. The date the policy started b. The date of maturity of the endowment c. The date the claim was filed d. The date the legal proceedings started

In the event an action to recover the proceeds due under an endowment contract is commenced and results in a judgment against the insurer, interest must be paid from the date of maturity of an endowment contract to the date the verdict is rendered or the report or decision is made. The correct answer is: b. The date of maturity of the endowment

When the only logical beneficiary is a minor, all of the following options are available, EXCEPT: Select one: a. The benefits can go directly to the estate of the insured. b. A trust can be established. c. The insurance company can hold the proceeds until the minor comes of age. d. A guardian can be appointed.

In the event that the only logical beneficiary for a life policy is a minor, the guardian, trust and insurance company holding the proceeds are all options available. But, they CAN'T go to the estate of the insured. *Remember the "insured" here does not refer to the kid but to the deceased. a. The benefits can go directly to the estate of the insured.

What are PROHIBITED PRACTICES for selling LTC or Medicare Supplement Policies?

In the transaction of LTC or Medicare Supplement policies, agents cannot use: -Twisting, -High pressure tactics, or -Cold lead advertising.

How are Cash Value Increases (on whole life insurance policies) taxed?

In whole life insurance policies, premiums build cash value. The cash value increases as interest is earned on the premiums, and grows tax-deferred. The policyowner can borrow against the policy cash value. If the policy cash value is surrendered or endows, the interest is taxable as ordinary income. The beneficiary receives the death benefit tax-free.

The FCRA requires the applicant be notified:

In writing if a credit report will be used and If the premium is increased because of a credit rating.

Susan receives income payments for a disability. Benefits are not based on Susan's ability to perform work duties. Which policy does Susan have? Select one: a. Any occupation b. Own occupation c. Residual disability d. Income replacement

Income replacement contract benefits are not dependent on the insured's inability to perform work duties. Instead, income replacement contracts replace a portion of the insured's lost income due to a covered accidental injury or sickness. The correct answer is: d. Income replacement

To which benefits do "indemnity," "valued," and "cash payment" apply?

Indemnity applies to health insurance. (Pays out however much is needed to cover the loss). Valued policies apply to life insurance and disability income policies. (Pays a stated amount, e.g., paid a fixed periodic income while disabled.) The periodic income is always less than the insured's income earnings to prevent profiting from loss. In life insurance, a stated amount (the death benefit) is payable upon the insured's death. Cash payment benefits are based on cash payment of the face amount stipulated in the policy.

The Basic Terms of Insurance Coverage include:

Indemnity, Limit of Liability, Premium, Deductible, Coinsurance, and Claim.

All of the following are defined contribution plans, EXCEPT: Select one: a. Individual annuity b. Money-purchase plan c. Pension plan d. Profit-sharing plan

Individual annuities are used to fund defined benefit plans. The correct answer is: Individual annuity

Which of the following is generally true regarding PREMIUMS for individually-purchased life insurance and annuities? Select one: a. They are tax-deductible. b. They are not tax-deductible. c. Only life insurance premiums are tax-deductible. d. Only annuity premiums are tax-deductible.

Individual life insurance and annuities are purchased with after-tax dollars. Premiums generally cannot be deducted from taxes. The correct answer is: They are not tax-deductible.

What is a "spend down"?

Individuals applying for Medicaid assistance must deplete or "spend down" their financial resources to a specific minimum before receiving Medicaid benefits. The amount of spend-down is established on a state-by-state basis. Individuals are permitted to keep some assets and income, including their primary residence.

How long is the conversion period for group long-term care policies? Select one: a. 31 days b. 60 days c. 90 days d. 180 days

Individuals must apply for the individual long-term care coverage and pay the premium within 31 days of the group long-term care coverage termination date. The correct answer is: 31 days

Who can enroll in Medicare Part D?

Individuals must meet the following requirements to receive Part D benefits: Be enrolled in Parts A and B Enroll in a Part D plan in their service area; if no plan is offered in a service area, a federal standard plan will be provided Individuals have two options for enrolling in a Part D plan: -During the initial enrollment period for Medicare; or -During the annual enrollment period for Part D: October 15th through December 7th. Coverage begins on January 1st of the following year.

Probationary Period for individuals who join a group

Individuals who join a group must undergo a waiting period prior to being eligible for coverage under the group plan. This waiting period is called a probationary period. Probationary periods usually last for the first 90 days of employment. Every time new insureds enroll in a group policy, the insurer incurs enrollment costs. Furthermore, groups that have frequent turnover incur great enrollment expense. For this reason, group policies have a probationary period. Probationary Period = 90 day

What medical services do I pay if I have Medicare B?

Individuals with Part B coverage are responsible for paying an annual deductible of $185 and 20% of all covered charges. Medicare pays the remaining 80% of covered charges after the deductible is met. Part B covers medically necessary services. Medicare beneficiaries pay nothing for most preventive services received by a doctor who accepts assignment. In some cases, a coinsurance may apply.

Disability policies differ from Medical Expense Insurance because they are only offered to ________________.

Individuals. Not entire families.

There are two types of consumer reports:

Inspection reports and Investigative reports

The agent issues a conditional receipt to the applicant after the application and premium have been collected. If the insurer accepts the policy as applied for, the coverage will take effect from the date of the application or medical exam, whichever is later. There are two types of conditional receipts:

Insurability and Approval. The insurability receipt provides interim coverage as long as the applicant is insurable. However, most conditional receipts are approval conditional receipts. The approval receipt does not begin until the insurer approves the application. Conditional receipts provide coverage only if the applicant is insurable as applied for.

Coverage begins on the application date or date of medical exam for which of the following?

Insurability receipt

Rescission

Insurance contracts may be voided if one or more parties to the contract commit a material misrepresentation or concealment.

Insurance

Insurance is the transfer of risk. Insurance protects against the future uncertainty of loss by transferring risk from the insured to the insurer.

"take it or leave it" contracts

Insurance policies are take it or leave it contracts because the insurance company writes the coverage, to which the insured either agrees to, or disagrees to. The insured does not have the liberty to change terms, conditions or provisions within the contract.

Unearned Premium

Insurance premium paid in advance which is used for future coverage (i.e., for which policy protection has not yet been given.)

Interest on Claims Proceeds (as a Conditional of a Policy)

Insurers are required to pay on valid health insurance claims within a certain amount of time. If the insurer fails to do so, the insurer will be required to pay interest on the claim. Interest is calculated from the day the health insurance claim payment should have been made.

When can PHI be disclosed?

Insurers must disclose PHI to an individual within 30 days of request (note: by individual, this means the person to which the PHI pertains - i.e., the patient). Insurers may communicate, disseminate, or otherwise disclose PHI only to facilitate treatment, payment, or healthcare operations, or with prior authorization of the individual. HIPAA also requires insurers to establish procedures to ensure individuals' PHI are protected from unauthorized disclosure.

Pre-existing Condition (Common Exclusions or Restrictions)

Insurers often exclude or limit coverage for pre-existing conditions, usually by requiring elimination or waiting periods before coverage will apply. Most states prohibit insurers from excluding pre-existing conditions for a period exceeding six month to two years, depending on the state and policy. The policy must clearly state any limitations or exclusions for pre-existing conditions.

A domestic company issuing what kind of contracts must establish one or more separate accounts? Select one: a. Standard b. Modified c. Variable d. Government

Insurers selling variable products must have at least 1 separate account. c. Variable

Which of the following statements is false regarding taxation of non-living entity owned nonqualified annuities? Select one: a. Interest earned on the principal is tax-deferred. b. Interest earned is taxed in the year it is earned. c. Only human annuitants can receive tax-deferred interest on annuities. d. A corporation that owns a nonqualified annuity will be required to pay tax on interest on a current-basis.

Interest accumulated on annuities that are owned by corporations is NOT tax-deferred. Rather, interest earned on corporate-owned annuities are taxed on a current basis. The annuitant must be a human in order for the interest to be tax-deferred. The correct answer is: a. Interest earned on the principal is tax-deferred.

All of the following statements are correct regarding variable universal life contract charges and fees, EXCEPT: Select one: a. Sales and loading charges are deducted from the policy's cash value. b. The full cost of death protection is deducted from the policy's cash value. c. Insurers must provide policyowner's with an annual statement of charges and interest earned. d. Interest earned is credited to the death benefit.

Interest earned is credited to the cash value. The correct answer is: d. Interest earned is credited to the death benefit.

In the event an action to recover the proceeds due under a life insurance policy or annuity contract is commenced and results in a judgment against the insurer,

Interest must be paid FROM the date of the death of an insured or annuitant in connection with a death claim on a life insurance policy or annuity contract and from the date of maturity of an endowment contract TO the date the verdict is rendered or the report or decision is made.

Which of the following is characteristic of fixed annuities? Select one: a. Variable interest rates during the pay-in period b. Fixed interest rates during the payout period c. Annuity payment amounts are flexible. d. Premiums are invested in the insurer's separate account.

Interest rates are fixed during both phases of the annuity. Each payment amount is fixed, and premiums are invested in the insurer's general account. The correct answer is: Fixed interest rates during the payout period

Factors that affect health insurance premiums include:

Interest, Expense, Morbidity, and Benefits provided by the policy.

When conducting business, a life insurance agent cannot use any of the following titles:

Investment Advisor Financial Planner Financial Consultant

Which of the following is a required disclosure that a viatical broker must provide to the owner no later than the date the life settlement contract is signed by all parties? Select one: a. The name, address and telephone number of the provider b. That the proceeds of a life settlement contract are not taxable c. That the proceeds from the life settlement contract are not subject to the claims of creditors d. That the owner has the right to rescind a life settlement contract for 90 calendar days after the date the contract is executed

It is a required disclosure to provide the name, address and telephone number of the viatical settlement provider no later than the date the life settlement contract is signed by all parties. The correct answer is: a. The name, address and telephone number of the provider

False Financial Statements

It is a violation of unfair marketing practices for any person to deliberately make a false financial statement regarding the solvency of an insurer with the intent to deceive others.

Which of the following statements about the respite care provision under a long-term care policy is CORRECT? Select one: a. It pays a benefit for a family caregiver to get away from their duties for a short period of time. b. It pays a benefit for the insured to return home for short visits. c. It pays a benefit for the insured to take a break at an approved day spa or adult day care. d. It pays a benefit to reimburse other family members who provide care for the insured.

It pays a benefit for a family caregiver to get away from their duties for a short period of time. Respite care pays the cost of either bringing a substitute provider into the insured's home or moving the insured to a care facility for a period of time. Its purpose is to give an unpaid caregiver (e.g., a spouse or family member) relief from their daily duties.

How is the Connecticut Life and Health Insurance Guaranty Association to be used in advertisements? Select one: a. It must always be mentioned. b. It may be mentioned at the insurer's discretion. c. It may be mentioned, but only with the written permission of the Commissioner. d. It must never be mentioned.

It shall be a prohibited unfair trade practice to use the existence of the Life and Health Insurance Guaranty Association in the solicitation, negotiation, procurement or effectuation of insurance.

What type of life insurance program would be a good choice for grandparents to help their grandson in later years? Select one: a. A fully funded universal life plan b. Annual renewable term c. Juvenile Life d. A limited pay life plan

Juvenile life is designed for this purpose. The correct answer is: Juvenile Life

Key Person Disability Income

Key person disability income pays periodic income benefits to businesses when a key employee is disabled. The purpose of the coverage is to allow the business to hire additional help while the employee is disabled. Key persons include: Business owners, Stockholders, and Executive managers who are active in the company. The amount of the disability income benefit is based on the key person's economic value to the business - the loss of income that would occur from reduced sales and hiring a replacement employee while the key person is disabled. Benefits may be paid as monthly periodic benefits, or in a lump sum. The business owns the policy, pays the premiums, and receives the benefits. The key person is the insured individual, who must sign the application, consenting to the coverage. Key Person Disability = Business Receives Benefits

Which of the following is not an optional benefit provided by LTC policies? Select one: a. Guaranteed insurability b. Nonforfeiture options c. Inflation protection d. Guaranteed renewable or noncancelable

LTC policies must be guaranteed renewable or noncancelable. The correct answer is: Guaranteed renewable or noncancelable

If the cash value of a Permanent Life Insurance policy is depleted and premium payments are no longer paid, the policy will _________-.

Lapse

Older annuitant =

Larger Benefit The older the annuitant, the more likely the annuitant is to die, so the higher the annuity payment.

Tax Equity and Fiscal Responsibility Act (TEFRA)

Legislation enacted to end discriminatory practices of group plans in favor of key employees, and made Medicare secondary to group health plans.

Age Discrimination in Employment Act (ADEA)

Legislation enacted to prevent discrimination of employees age 40 or older. -The ADEA prohibits forced retirement of employees other than executives or other managerial or policymaking positions. -Employee benefits must be continued for older workers, although some benefit reductions are allowed. -TEFRA amended ADEA by requiring employers to offer the same coverage available to younger employees to older employees and their dependents. Some states have strict laws relating to retirement and benefits. The ADEA only applies to employers with 20 or more employees. ADEA applies if 20 or more employees.

Employee Retirement Income Security Act (ERISA)

Legislation enacted to provide minimum benefit standards for pensions and employee benefit plans, including fiduciary responsibility, reporting and disclosure practices, and vesting rules.

There are three main types of term life insurance:

Level Decreasing Increasing

Level Term =

Level Benefits (not necessarily level premiums, as in LPLT [Level Premium Level Term])

Susan has a $500,000 permanent life insurance policy. She has paid $200,000 in premiums, and the policy has a cash value of $216,000. If Susan dies, her beneficiary will pay taxes on: Select one: a. $0 b. $16,000 c. $284,000 d. $500,000

Life insurance death benefits are tax-free. The cash value is included in the death benefit, so it is not taxed. The correct answer is: $0

For what reason would the insurance company raise the death benefit of a universal life policy? Select one: a. Prevent the cash value from growing too quickly b. Require the policyowner to pay higher premiums c. To accommodate lower cash value growth d. To allow the policy to become a MEC

Life insurance policies must comply with the seven-pay test in order to keep their tax-exempt status. If the cash value is growing too quickly, the insurer will increase the policy's death benefit so the policy does not become a MEC. The correct answer is: Prevent the cash value from growing too quickly

Which type of life insurance policy allows an employer to deduct premium payments as an ordinary business expense for tax purposes? Select one: a. Key employee b. Split-dollar plan c. Group life insurance d. Business continuation agreement

Life insurance policy premium payments are not tax-deductible as a business expense if the company is using the policy for business purposes; however, the proceeds are tax-free. The exception to this is when a business purchases group insurance for the benefit of its employees. The correct answer is: Group life insurance

What do I have to do to get into selling life settlements?

Life settlement brokers must have been licensed as a life insurance producer in Connecticut for one year or more is permitted to sell life settlements. Within 30 days of a producer acting as a life settlement broker, the producer must notify the Commissioner that he is acting as a life settlement broker by submitting the appropriate application form and paying the fee. Licenses are valid until the last day of March each year, but may be renewed with proper submittal of the renewal application and fee. Life settlement brokers must complete 15 hours of training related to life settlements every 2 years. Life insurance producers acting as viatical settlement brokers are not required to complete these training requirements.

Life Settlement

Life settlements work the same way as viatical settlements, in that a life insurance policy is sold to a third party in exchange for a large portion of the death benefit, except that the insured is not terminally or chronically ill.

The amount of money an individual can contribute to their traditional IRA is:

Limited, Indexed annually and Set by law.

How does taxation work with an LTC policy?

Long-term Care Insurance Premiums paid for long-term care policies are tax-deductible only if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. Deductions must be itemized on the individual's tax return. Deductions are limited to a specified dollar amount per year based on the Consumer Price Index and the recipient's age. Benefits are received tax-free.

long-term care insurance

Long-term care expense policies cover the cost of long-term care, such as care received in a nursing home or skilled care facility. Long-term care benefits are payable to insureds who cannot perform some ADL's (e.g., dressing, bathing, eating, etc.) or who are cognitively impaired.

Loss Ratio =

Losses/Premiums

Lower Risk =

Lower Premium

Longer Elimination Periods = _______ Premiums

Lower Premiums

There are five settlement options:

Lump sum Interest only Fixed-period installments Fixed-amount installments Life income

Male annuitant = This is the reverse logic of life insurance: the longer the annuitant is expected to live, the lower the annuity payment. Because women are expected to live longer than men, the annuity payment will be lower.

Male annuitant = Larger Benefit Example: Robert, a 75 year-old man, and Ella, his 75 year-old wife, both purchase $100,000 immediate annuities. The monthly payments that Robert receives are higher than Ella's because he is not expected to live as long as Ella. Mortality tables state that women live longer than men.

How does preexisting conditions work with LTC policies?

Many LTC policies do not cover pre-existing conditions that were present six months prior to the policy's effective date. This is the most restrictive definition of pre-existing conditions an insurer can use. Six months after the effective date of coverage, all pre-existing conditions must be covered.

McCarran Ferguson Act/ Public Law 15

McCarran-Ferguson Act was passed by Congress on March 9, 1945. The McCarran-Ferguson Act states that while the federal government has the authority to regulate the insurance industry, it would not exercise its right if the insurance industry were regulated effectively and adequately on the state level. This prompted each state to begin forming insurance departments, as well as to pass state laws regarding licensing, rates and trade practices.

When a person dies, there are several costs that need to be paid which include:

Medical bills, The funeral, Burial, Taxes, Debts and Dependents' needs.

What policies require medical examinations?

Medical examinations are more often required for life insurance policies, but some health insurance policies may also require a medical examination. A life insurance policy that does not require a medical examination is referred to as "simplified issue life insurance" or "non-medical application." A medical examination may be required for whole and term life policies, especially those with higher face amounts. Medical exams may be required because an applicant's health affects his life expectancy, and consequently the underwriting of a life insurance policy. Insurers pay the cost of medical examinations.

Medical expense insurance may cover all of the following, EXCEPT: Select one: a. Accidental injury b. Physician's fees c. Prescriptions d. Disability income

Medical expense insurance covers the cost of medical treatments, physician's fees, hospitalization and other medical costs that ensue when the insured incurs an accidental injury or sickness. Disability income insurance pays a portion of the insured's income while the insured is disabled and unable to work. The correct answer is: Disability income

Medical Expense Insurance

Medical expense insurance covers the cost of medical treatments, physician's fees, hospitalization and other medical costs that ensue when the insured incurs an accidental injury or sickness. Medical expense benefits may cover the insured and their dependents.

Specified Coverages Versus Comprehensive Care

Medical expense plans may be specified coverage or limited policies, such as vision plans or cancer coverage. Comprehensive polices provide broad health care coverage including preventive care, immunizations, outpatient and inpatient care. HMOs are a good example of comprehensive care.

Fee-for-service Basis Versus Prepaid Basis

Medical expense plans may pay benefits on a fee-for-service basis. This means that medical providers are paid for each service they provide and insureds only pay for the medical services they use. With a prepaid basis, medical providers are compensated on a service basis rather than a dollar basis. Medical providers receive fixed compensation; regardless of how many patients they treat.

Which payment method is used to pay medical providers for each service they provide, and only for the medical services insureds use? Select one: a. Fee-for-service basis b. Prepaid basis c. Service basis d. Valued basis

Medical expense plans may pay benefits on a fee-for-service basis. This means that medical providers are paid for each service they provide and insureds only pay for the medical services they use. The correct answer is: Fee-for-service basis

Benefit Schedule vs. Usual, Reasonable and Customary Charges

Medical expense plans may pay benefits on a schedule in which coverage is specifically identified by procedure or treatment with a fixed amount. Other plans may use the usual, reasonable and customary charge method in which the insurer pays an amount for each procedure or treatment based on the average charges in that geographic area.

Base Plans

Medical expense plans providing first-dollar coverage which have low limits for catastrophic coverage. Base plans include medical, hospital and surgical.

Medigap

Medical expense policies issued by private organizations which help cover certain costs not covered by Medicare, such as deductibles, coinsurance and actual charges in excess of what Medicare pays. Also referred to as Medicare supplement policies.

All of the following are ways medical expense policies pay benefits, EXCEPT: Select one: a. Reimbursement b. Service basis c. Indemnity d. Valued

Medical expense policies may pay benefits in the following ways: reimbursement (expense-occurred), where the policyholder is reimbursed for the cost of medical care; service basis, where providers are paid directly by the insurer; or on an indemnity basis, where the policy pays a fixed amount regardless of the cost of medical care. Disability income policies pay benefits on a valued basis. The correct answer is: Valued

Underwriters at the insurer's home office classify risks by analyzing applicants':

Medical history, Hobbies, Occupation, and Character.

Which of these statements regarding Medicare is CORRECT? Select one: a. Under Medicare Part B, payments for physicians' services are unlimited. b. Medicare recipients are billed for their Medicare Part A premiums on a semiannual basis. c. Medicare Part A hospital insurance (HI) carries no deductible. d. Medicare Part B supplement Medicare insurance (SMI) is voluntary.

Medicare Part B supplement Medicare insurance (SMI) is voluntary. Medicare coverage has two separate parts: Hospital Insurance (Part A) and Medical Insurance (Part B). Medicare Part A is automatically available to persons who have turned 65 and have applied for Social Security benefits. Medicare Part B is voluntary and may be elected or rejected as the recipient wishes.

Special Needs Plan (SNP)

Medicare Part C plan intended for individuals who are insured under Medicare and Medicaid. Part C = Private Insurance

Original Medicare

Medicare Parts A and B providing only hospital and medical coverage.

Medicare Savings Programs (MSPs)

Medicare Savings Programs (MSPs) receive funds from Medicaid to assist individuals in paying Medicare premiums. Some MSPs pay a portion of Medicare Part A and B deductibles and coinsurance.

It is ILLEGAL to sell a _____________ ____________ policy to an individual who already has one.

Medicare Supplement

Medicare Supplement Policies (Medigap)

Medicare Supplement Policies Medical expense policies issued by private organizations which help cover certain costs not covered by Medicare, such as deductibles, coinsurance and actual charges in excess of what Medicare pays. Also referred to as Medigap.

What federally-funded program provides benefits to people regardless of age, who qualify for Social Security or Railroad Retirement Board disability benefits, those with end stage renal disease, or those who have Lou Gehrig's disease? Select one: a. CHAMPUS b. TRICARE c. Medicare d. Medicaid

Medicare also provides benefits to people, regardless of age, who qualify for Social Security or Railroad Retirement Board disability benefits, those with ESRD (end stage renal disease permanent kidney failure), or those who have Lou Gehrig's disease. The correct answer is: c. Medicare

Initial Enrollment Period

Medicare eligibility period, six-month period spanning three months prior to reaching age 65 to three months after a person's 65th birthday.

Marie, age 65, has group health coverage through work and her employer has 10 employees. If Marie enrolls in Medicare, what is the primary payor? Select one: a. Medicare b. Marie's employer c. Both Medicare and Marie's employer d. Neither Medicare nor Marie's employer

Medicare is primary if an individual retains group employer coverage and enrolls in Medicare, and there are fewer than 20 employees insured under the group plan. However, if there are 20 or more employees insured under the employer group coverage, then Medicare is secondary. The correct answer is: Medicare

Medicare Part C

Medicare managed care. Formerly known as Medicare+Choice. Also referred to as Medicare Advantage. Part C encompasses the coverages of Parts A and B, and some plans offer coverage at an additional cost for: Prescription drugs, Eye care, and Dental care.

When can I access my HMO network for information or services?

Members have 24-hour access to the HMO. Telephones are answered and referrals and authorizations are made 24 hours a day, seven days a week. Nursing and medical staff, including PCPs, must be willing to respond during non-business hours.

Individual Practice Association Model

Method of organizing an HMO. Functions like the group model except the HMO contracts with medical groups, physicians' associations and independent physicians providing open panel services.

Staff Model

Method of organizing an HMO. Physicians are employees of the HMO.

Network Model

Method of organizing an HMO. Similar to the group model, a network model HMO contracts with two or more medical groups (instead of one) to provide medical services to HMO members.

Group Model

Method of organizing an HMO. The HMO contracts with one independent medical group to provide medical services to HMO members. Synonymous with medical group model and group practice model.

Group insurance can be funded in the following ways:

Minimum Premium: An agreement is made between the policyowner and the insurer in which the policyowner pays the minimum amount of the premium for anticipated claims, and the insurer pays the excess. Retrospective Premium: The insurer collects a base premium amount, but is entitled to collect additional premium amounts based on the actual loss experience. Administrative Services Only (ASO): This option applies specifically to health insurance - a group policy is self-funded, and an insurer is subcontracted to process claims. Shared-funding: This funding agreement is specific to health insurance. It allows the policyowner to self-fund its medical expenses; but after a specified amount, the insurer will cover the remaining costs.

Modifications. Who can make them?

Modifications are policy changes and must be made by an authorized officer of the insurer and attached to the policy. Only the policyowner has the right to request changes. Changes to the policy can only be implemented by an executive officer of the insurer Insurance Producers --> Can't Make Changes

All of the following are characteristics of tax-sheltered annuities, EXCEPT: Select one: a. Tax-sheltered annuities are available to tax-exempt nonprofit organizations and public schools. b. The employer establishes the tax-sheltered annuity and contributions made by employees are non-taxable. c. The purpose of tax-sheltered annuities is to save money for retirement income. d. Money invested in a tax-sheltered annuity is taxable upon deposit.

Money invested in tax-sheltered annuities is taxable upon distribution, not deposit. The correct answer is: Money invested in a tax-sheltered annuity is taxable upon deposit.

Spouse's Benefit

Monthly payments are made to the retired covered worker's spouse, age 65 and older, in an amount of 50% of the covered worker's PIA. The benefit is decreased for spouses receiving benefits at the earliest age of 62. Monthly payments are made to the spouse (includes divorced spouse over the age of 62), regardless of age, if the spouse is caring for the covered worker's unmarried dependent child under the age of 16 or a child who became disabled prior to age 22.

Child's benefit

Monthly payments are made to the retired covered worker's unmarried child or grandchild who is under the age of 18 (19 if the child is a full-time high school student) or a child at any age who became disabled before the age of 22 in the amount of 50% of the covered worker's PIA.

Joe becomes totally disabled. How much will Social Security pay Joe's wife, who relies on child support payments from Joe, to care for their 12-year twins? Select one: a. 1/4 Joe's PIA b. 1/2 Joe's PIA c. 3/4 Joe's PIA d. Joe's PIA

Monthly payments to a disabled worker's spouse, if the spouse is caring for a child under the age of 16, or a disabled child under the age of 22 are made in the amount of 1/2 of the worker's PIA. The correct answer is: 1/2 Joe's PIA

Premium modes include:

Monthly, Quarterly, Semiannually or Annually. In some cases, a single premium is paid for the entire policy. In most cases, premiums are paid in advance and to the producer or the insurer's home office.

Health insurance premiums are based on three factors:

Morbidity (rate of accident or sickness), Interest, and Expenses.

Monthly Premium =

Most Costly

Dependent Coverage with Group Life Insurance

Most group life policies (except group credit life) allow the insured's dependents to be covered under the group plan: Spouse, Children (including natural, step, foster and adopted) under the dependent age limit, Dependent parents, and Other individuals who are dependent on the insured. The amount of coverage for each covered dependent cannot exceed 50% of the insured member's coverage. Example: If an employee is covered for $15,000, then the maximum coverage for the employee's spouse and two children is $7,500 each.

In addition to being a commercial pilot, Michael also flies his own private small plane. What will most likely happen when he applies for life insurance? Select one: a. The policy will exclude coverage for private aviation activities. b. He will be charged a higher premium to compensate for the added risk. c. He will not be able to buy life insurance. d. He will need to quit flying.

Most insurance companies do not deny coverage if a person is involved in aviation. They charge a higher premium to balance the added risk. The correct answer is: b. He will be charged a higher premium to compensate for the added risk.

Generally speaking, Mutual Companies issue (Participating/Nonparticipating) policies and Stock Companies issue (Participating/Nonparticipating) policies.

Mutual Companies = Participating Stock Companies = Nonparticipating

Mutual Insurers

Mutual insurers are commercial companies owned by their policyholders. There are no stockholders. Mutual insurers are distinct from stock insurers in two primary ways: They lack capital stock, and Profits are distributed among their members - the policyholders. Mutual insurers are referred to as participating insurers. Because mutual insurers do not have capital stock, the funds required to start the company must be obtained from an individual or group of people.

Lump Sum =

No Tax

Required Provision 11: Legal Actions

No legal action may be brought to recover on the policy until 60 days after written proof of loss is provided to the insurer. 60 Days = Before Legal Action No legal action may be brought after the expiration of three years (in some states, two years) after the time written proof of loss is required to be provided to the insurer.

In Connecticut, a life insurance policy cannot be backdated more than: Select one: a. 3 months b. 6 months c. 9 months d. 12 months

No policy of life insurance shall be issued or delivered in Connecticut if it is issued or takes effect as of a date more than 6 months before the application for the insurance was made, if the applicant would rate at an age younger than at the date when the application was made according to his age at nearest birthday. The correct answer is: b. 6 months

Bail-Out Provision =

No surrender charges. *This has to be in the conditions of the initial contract.

Policyowners may take out a loan against their life insurance policy cash value. Is this borrowed money taxable?

No. But the insurer will charge interest on loans that have not been repaid. Loans are repaid or recovered upon policy surrender or maturity.

Can we get one medigap policy to cover both of us as a married couple?

No. Each Medigap policy insures one individual, so a married couple wanting Medigap coverage would require two separate Medigap policies. Each individual pays monthly premiums for Medigap coverage.

Are accelerated benefits taxed?

No. Accelerated benefits are received income tax-free as long as the distribution is qualified. This means that the insured is suffering a terminal illness that is expected to result in death within two years.

Can I sell variable policies with a license in Life and Health?

No. Insurance agents selling variable policies must be licensed life and variable insurance producers in the state they intend to transact business, and be registered with the Financial Industry Regulatory Authority (FINRA) by holding a securities license. The U.S. Securities and Exchange Commission (SEC) oversee the operations of FINRA.

Noncontributory

Noncontributory plans are paid solely by the policyowner. Noncontributory group plans require that 100% of the group's eligible employees must participate in the group plan. In group employer policies, employers must pay at least some portion of the premium. Non-employer groups in which the members are fully responsible for paying premiums and the group pays no part of the premiums are called fully contributory plans.

Nonforfeiture options are available to contract owners of all of the following, EXCEPT:

Nonforfeiture options are available to contract owners of deferred annuities, SPDA and FPDA, but not SPIA. The correct answer is: SPIA

Nonforfeiture Options

Nonforfeiture options/values are guarantees that are required by law to be part of life insurance policies that build cash value. Insurers are required to make nonforfeiture values available when policyowners discontinue premium payments for any reason. Insurers are required to provide a table of guaranteed nonforfeiture values to policyowners for at least a 20-year period with the policy. This table is specific to the coverage purchased and shows each of the nonforfeiture options after a certain number of years. There are three nonforfeiture options: Cash surrender Extended term insurance Reduced paid-up insurance

All of the following statements are correct, EXCEPT: Select one: a. With the cash refund option, the beneficiary receives the balance of premiums plus interest minus benefits paid in a lump-sum. b. All annuities have an annuity period, but may not have an accumulation period. c. The fixed period installment annuity makes periodic payments for a set period of time. d. All annuities are qualified.

Not all annuities are qualified. Some annuities are used to fund nonqualified retirement plans. The correct answer is: d. All annuities are qualified.

For an insurance contract to have legal purpose it must...

Not be in opposition of public policy. Have an insurable interest AT THE TIME OF THE APPLICATION An insured who's provided written consent.

Can I get LTC covered through Medicare, Medicare Supplement, or Medicaid?

Not really. Only limited skill nursing coverage, and not for being old. Medicare, Medicare Supplement, and Medicaid do not cover long-term custodial or nursing home care, and only provide limited skilled nursing coverage if medically needed for treatment, not advanced age. Medicaid's coverage of nursing home care is ONLY available to those who qualify because of limited income and assets. Aging populations often require care because of old age, not due to sickness or accident. LTC coverage fulfills this need.

Occupational Versus Nonoccupational Coverage (Common Exclusions or Restrictions)

Occupational coverage provides for the payment of benefits for sickness or injury of the insured that occurred at work, while nonoccupational coverage excludes any conditions resulting from job-related activities. Nonoccupational coverage is common for individuals with hazardous or extremely dangerous careers. The policy must state whether coverage extends to job-related injuries or illness and any related limitations or exclusions.

Churning

Occurs within the same company. Churning is the practice of using misrepresentation to induce a policyholder to replace a policy issued by the insurer the producer represents, rather than the policy of a competitor. The objective of churning is to allow the producer to collect a large first-year commission on a new policy. Whereas twisting involves the policies and revenues of another insurer, churning occurs within the same company. Churning is the result of a producer putting their own interests above those of the client and the company for whom he is an agent.

Four elements must be present in every contract to be valid and legally enforceable. These elements include:

Offer and acceptance, Consideration, Competent parties, and Legal purpose.

When Dakota's life insurance policy was written, it stated on the policy that Dakota was male. However, Dakota is female. On average, women tend to live several years longer than men. When Dakota died this misstatement was discovered. How did this impact the policy? Select one: a. The death benefit was lowered. b. The premium was lowered. c. The death benefit was increased. d. The premium was increased.

On average, women tend to live several years longer than men. This is why life insurance premium rates tend to be lower for women. The answer is: c. The death benefit would be increased.

Considerations for someone who applies for a Single Premium Whole Life policy:

On the upside, one large sum premium is less overall compared to the premium installments over the course of the insured's life due to less administrative costs - only one payment needs to be processed. On the downside, if the insured dies soon after the single premium was paid, then the cost of the protection is extremely high for the policyowner compared to if premiums had been paid in installments over the course of the insured's life. Differences with straight life and limited payment: -Immediate cash value -Single premium policy is not "front-end loaded", meaning costs of administering the policy are not deducted from the initial premium. --Instead, a surrender charge is levied if the policy is surrendered during its first 10 years.

Which of the following statements correctly describes enrollment in Medicare Part B? Select one: a. Medicare Part A enrollment must occur prior to Medicare Part B enrollment b. Medicare Part B must be applied for six months prior to the individual's birthday month c. It is automatic upon Medicare Part A enrollment, unless declined d. Enrollment in Medicare Part A is not required to enroll in Medicare Part B

Once a person is eligible to enroll in Medicare Part A, Medicare Part B enrollment is automatic unless coverage is declined. The correct answer is: a. It is automatic upon Medicare Part A enrollment, unless declined

Unilateral =

One Promisor

What is one disadvantage of PPOs?

One disadvantage of PPOs occurs when a PPO contracts with a group of physicians rather than individual doctors, where individual doctors may move out of a practice for a number of reasons and the contract does not automatically go with them. A PPO participant may find that their doctor is no longer a contracted provider for this reason and be reimbursed with a lower scale of benefits.

Which of the following is not considered 'other benefits' under multiple insurer coverage? Select one: a. Auto medical payments b. Union welfare plans c. Blue Cross Blue Shield benefits d. Life insurance policies

Only life insurance policies would be excluded from 'other benefits' of multiple insurers. d. Life insurance policies

An adjustable life policy allows the policyowner to make all of the following changes, EXCEPT: Select one: a. Invest premiums in a separate account b. Change the length of the coverage period c. Increase or decrease the premium d. Change the length of the premium-paying period

Only variable life policies allow policyowner's to invest premiums in the insurer's separate account. The correct answer is: Invest premiums in a separate account

When is open enrollment for Medicare supplement policies? Select one: a. Open enrollment for Medigap policies spans a three-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B. b. Open enrollment for Medigap policies spans a five-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B. c. Open enrollment for Medigap policies spans a six-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B. d. Open enrollment for Medigap policies spans a eight-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B.

Open enrollment for Medigap policies spans a six-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B. The correct answer is: c. Open enrollment for Medigap policies spans a six-month period beginning on the first day of the month in which the individual is age 65 or above and enrolls in Medicare Part B.

Optionally Renewable Provision

Optionally renewable policies provide the insurer the right not to renew the contract for ANY REASON. Policies can only be non-renewed on a policy anniversary date or premium due date. Policy premiums can be increased. Pending claims are eligible for payment regardless of whether or not a policy is renewed. Optionally Renewable = Insurer's Option

There are three main types of life insurance:

Ordinary Life, Industrial Life, and Group Life.

What all does Medicare Part B cover?

Outpatient doctor and nursing services, Doctor visits, Physical examinations, Physical therapy, Preventative care, Surgery services, Diagnostic tests, X-rays, Supplies provided in an emergency room, doctor's office, clinic, or hospital, and Durable medical equipment at home. Part B covers outpatient hospital services received in: A hospital, Emergency room, or Outpatient clinic. Part B also covers part-time services for limited home health visits, including 100% of approved charges and 80% of approved charges for durable medical equipment. Part B covers only drugs given at the doctor's office or hospital. Part B covers only drugs given at the doctor's office or hospital. Part B coverage for mental health services is limited to a benefit of 45% of approved charges. Medicare pays 100% of the cost of clinical laboratory services, such as: Blood tests and Urinalysis. The blood deductible applies if not already met for Part A. For home health services, Medicare beneficiaries pay nothing for Medicare-approved services. A 20% coinsurance applies for durable medical equipment. For doctor services, the 20% coinsurance of the Medicare-approved amount applies. For diabetes, coverage is provided for: Blood sugar testing monitors, Blood test strips, Lancets, Blood sugar control solutions, and Sometimes therapeutic shoes. Insulin is only covered if an external insulin pump is used. The 20% coinsurance and Part B deductible applies. Flu shots are covered once every year during the flu season (fall or winter). The Medicare beneficiary pays nothing if the health care provider accepts assignment. Mammograms are covered once every 12 months for women age 40 and older. If the doctor accepts assignment, the Medicare beneficiary pays nothing. Medicare covers prostate cancer screenings (digital rectal exam and PSA (prostate specific antigen) test) once every 12 months for men age 50 and older. The earliest the test may be received is the day after the 50th birthday. The 20% coinsurance and Part D deductible applies. Medicare covers two types of physical exams: A one-time "Welcome to Medicare" physical exam, as long as the physical exam is within the first 12 months of the Part B coverage effective date; After that, Medicare covers one physical exam called the "yearly wellness visit," every 12 months. If the doctor accepts assignment, the Medicare beneficiary pays nothing. Smoking cessation, or counseling to quit smoking, is covered as a preventive service, as long as the Medicare beneficiary has not been diagnosed with an illness caused or complicated by tobacco use. This is 100% covered by Medicare. The Medicare beneficiary pays nothing.

What is PACE?

PACE stands for Programs for All-inclusive Care for the Elderly. PACE is for elderly and disabled individuals. Care is provided in a community setting, such as a nursing home. PACE is provided ONLY in states that have elected it as a Medicaid benefit. PACE coverages include: -Medical services, -Long-term care, -Social services, and -Prescription drug coverage. Individuals who meet all of the following are eligible for PACE: -Age 55 and above; -Resides in a PACE organization's service area; and -State-certified as requiring nursing home care.

What is the basis for Social Security retirement benefits? Select one: a. Status of dependency b. Age c. Primary insurance amount (PIA) d. Quarters of credit

PIA

PPO does what?

PPOs provide discounted medical services to members. A group wishing to provide health care services to its members forms a PPO. The PPO receives a special discounted rate by using certain medical practitioners, hospitals and clinics. In exchange, the PPO will refer members to these medical professionals. An insurance company may contract with a PPO to provide medical services to insureds.

An applicant has insurable interest in which family members?

Parents, Grandparents, Children, Grandchildren, and Siblings.

Medicare has expanded to offer managed care and prescription drug coverage. The four types of Medicare coverage include:

Part A: Hospital insurance Part B: Medical insurance Part C: Managed care (Medicare Advantage) Part D: Prescription drug coverage

An insurance application has three basic parts:

Part I General Information, Part II Medical Information, and Part III Agent's Report.

Partial Disability

Partial disability is the inability of an individual: To perform one or more work duties in their own occupation, or To work full-time. The individual's income must be reduced as a result of the partial disability.

Participating Versus Nonparticipating

Participating health insurance policies (par) pay dividends to policyholders. Policyholders can choose what form they want to receive their dividend: Cash, Accumulate with interest, Purchase more coverage, Reduce premium, Pay up policy, or Purchase one-year term insurance. Nonparticipating health insurance policies (nonpar) pay dividends to shareholders, not policyholders. Participating policies tend to have higher premiums because insurers incorporate a deliberate overcharge as a safety margin. If the insurer does not need the additional premium, it will be returned to policyholders in the form of dividends.

During the application process, I should collect information about the applicant's:

Past health, Current health, Occupation, Lifestyle and Habits.

In what sense are PCPs "gatekeepers"?

Patients must visit the PCP when they require medical services. The PCP will consult records of all physicians and other providers in the HMO in order to coordinate the patient's treatment. The PCP determines if the physician can treat the patient satisfactorily or needs to issue a referral for the patient to visit a specialist outside the HMO. The purpose of the gatekeeper system is to preclude unnecessary visits and treatments. Gatekeeper = Primary Care Physician

What happens when a universal life policyholder pays the target premium? Select one: a. The face amount will automatically increase. b. The face amount will automatically decrease. c. The policy will resemble term life insurance. d. The policy will resemble whole life insurance.

Paying the target premium will build cash value in the policy, and the policy will resemble whole life insurance. The correct answer is: The policy will resemble whole life insurance.

Copayment

Payments the insured makes for benefits or services provided under the policy coverage. Sometimes called "copays", these fixed-dollar payments are usually small ranging from $5 to $40.

Disability Income Rider =

Pays Income on Face Amount, Weekly or Monthly If the policyowner becomes totally and permanently disabled, the insurer will pay the insured a periodic income, and in some policies, it also waives the policy premiums. The periodic income is based on the policy's face amount and is paid weekly or monthly during the insured's disability. There is usually a waiting period of 3 or 6 months once the policyowner becomes disabled to establish that the disability is permanent.

What does Medicare Part B cost?

People who are covered by Medicare Part A are eligible for Part B. Premiums for Part B are based on an individual's yearly income. An individual filing a tax return singly with an income of $85,000 or less; or, a couple filing jointly with an income of $85,001 up to $170,000 will pay the standard monthly premium. The standard monthly premium amount is $135.50.

Policy Term

Period during which the policy or contract is effective.

Whole Life =

Permanent

The Commissioner may suspend or revoke an insurance agent's license, for the following actions:

Persistently or substantially violates the insurance laws of Connecticut. Uses methods and practices which endanger the interests of customers or the public, including unfair trade practice or fraud. Engaging in insurance transactions before obtaining a required license. Has inadequate financial resources which are inadequate to safeguard the interests of customers or the public. Provides incorrect, misleading, or untrue information on a license application. Improperly withholds, misappropriates, or converts any money received in the course of transacting insurance Intentionally misrepresenting the terms of a proposed insurance contract. Has been convicted of a felony. Has been found to be untrustworthy or incompetent. Is affiliated with an insurer who does not have a certificate of authority. Cheated on an examination. Had an insurance producer license denied, suspended, or revoked in another jurisdiction. Has failed to pay child support, state income taxes, or federal income taxes, or is in default or breach of any obligation under any student loan.

Penalties for accessing credit information

Persons accessing credit information are subject to civil and criminal action for failure to comply with the Fair Credit Reporting Act. Persons who fail to comply may be subject to pay a criminal penalty of up to $50,000.

The most important factors in underwriting a health insurance policy are:

Physical condition, Moral hazards, and Occupation.

Medicaid provides coverage for:

Physician and skilled home nursing services, Inpatient and outpatient hospital care, Laboratory and X-ray services, Home and rural health care services, Screenings and treatment, Family planning services, Prescription drugs, Dental services, Private duty nursing services, Eyeglasses, and Medical supplies.

Medicaid pays for medical care that lower income individuals cannot afford, such as:

Physician's fees, Hospitalization, Pregnancy, and Maternity care.

Which of the following is not covered by Medicare Part A? Select one: a. Physicians' fees while an inpatient b. Meals while an inpatient c. General nursing services d. Semi-private room

Physicians' fees while an inpatient Medicare Part B covers physicians' fees.

Self-inflicted Injuries (Common Exclusions or Restrictions)

Policies may exclude or limit coverage for injuries or illnesses resulting from suicide, attempted suicide, or other self-inflicted injury of the insured.

Participation in a Felony (Common Exclusions or Restrictions)

Policies often exclude coverage for injury or illness of the insured resulting from the commission or attempt to commit a felony. Criminal conviction is required to exclude coverage for participation in a felony.

Act of War (Common Exclusions or Restrictions)

Policies often exclude coverage for sickness or injury resulting from an act of war. Terrorist attacks are often considered a form of undeclared war. If coverage for conditions caused by an act of war is limited or excluded, the policy must define the terms of the limitation or exclusion.

Total disability caused by sickness must occur prior to the insured reaching the age of: Select one: a. 40 b. 55 c. 60 d. 65

Policies that pay lifetime benefits for disability caused from sickness usually require that the disability occur prior to the insured reaching the age of 55.

Major Medical Policies

Policies that provide high limits for catastrophic coverage and broad coverage for medical expenses. Major medical plans have deductibles, coinsurance, eligible expenses and a maximum dollar benefit.

A policy loan on a whole life policy is: Select one: a. Not taxable b. Taxable c. Tax-deferred d. Taxable if not repaid prior to policy maturation

Policy loans are not taxable. The correct answer is: Not taxable

In third-party ownership the three parties to the contract are:

Policyowner, Insured, and Insurer.

Conditional Receipt =

Possibly Covered

Following are a list of common exclusions found in LTC policies:

Pre-existing conditions Injuries due to war or acts of war Self-inflicted injuries including attempted suicide Mental illnesses; however, Alzheimer's disease is covered Alcoholism or drug dependencies Treatments provided by Workers' Compensation, Medicare, veteran's hospital, etc.

What sorts of things would usually be excluded from a major medical policy?

Pre-existing conditions Self-inflicted injuries Suicide War or acts of war Experimental procedures Organ transplants Injuries incurred while committing a felony Cosmetic surgery* Infertility services Skilled nursing care and rehabilitation Home health care Occupational injuries or sicknesses covered by Workers' Compensation Care received in government medical facilities Routine physical exams Dental care Eyeglasses and contact lenses Hearing aids Custodial Care

The following rating classification system is used to categorize the favorability of a given risk:

Preferred Standard Substandard Declined

All of the following are true regarding PPOs, EXCEPT: Select one: a. PPOs are a group of medical facilities, physicians and practitioners in a designated geographic area that agree to provide medical services at a discount. b. PPO members typically pay more than non-PPO members. c. Compared to an HMO, members of a PPO have more options and choices in the medical providers from which they can utilize. d. No matter where a member under a PPO receives emergency care, it is covered by the plan.

Preferred Provider Organizations, or PPOs, are a group of medical facilities, physicians and practitioners in a designated geographic area that agree to provide medical services at a reduced cost. The cost of care provided by a PPO is usually less than what non-PPO members are charged. Compared to an HMO, members of a PPO have more providers from which to choose. In an emergency situation, the PPO will pay the full cost, regardless of where and from whom the member receives emergency care. The correct answer is: b. PPO members typically pay more than non-PPO members. They actually PAY LESS!?

Premiums for a joint and survivor life annuity are based on the annuitants': Select one: a. Ages only b. Sex only c. Ages and sex d. Ages, sex and geographic location

Premiums for a joint and survivor life annuity are based on the ages and sex of the annuitants. The correct answer is: c. Ages and sex

How does taxation work for group life insurance?

Premiums for group life insurance paid by the employee are NOT tax-deductible, but the employer can deduct premiums it pays as a business expense. Just like individual life policies, proceeds from a group life policy are tax-free IF taken in a lump sum. Proceeds taken in installments will be subject to taxes on the interest portion of the installment.

How do taxes affect Medical Expense Coverage for Sole Proprietors?

Premiums for medical expense insurance policies, including long-term care providing coverage to sole proprietors and partners and their families, are completely tax-deductible as a business expense, not to exceed income earned that year. Premiums cannot be deducted if the individual is eligible for coverage under their or their spouse's employer-subsidized health plan. Benefits are received tax-free as long as they do not exceed the actual cost of medical expenses.

How does taxation work for the medicare supplement?

Premiums paid for Medicare Supplement policies are tax-deductible only if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. Deductions must be itemized on the individual's tax return. Benefits are received tax-free.

Presumptive Disability

Presumptive disability is a CONDITION in a disability income policy that permits the insured to be AUTOMATICALLY ELIGIBLE for total disability income benefits, regardless of their ability to work. Examples of presumptive disability include: -Loss of vision in both eyes, -Loss of use or dismemberment in any two limbs, or -Complete loss of hearing or speech.

PIA

Primary Insurance Amount It is equal to the worker's full retirement benefit at age 65.

Insurance companies must provide the Commissioner with a list of the agents whose appointments will continue each even-numbered year by: Select one: a. 1-Jan b. 15-Apr c. 1-May d. 31-Dec

Prior to May 1st of even-numbered years insurance companies represented by any licensees shall provide the Commissioner with the names of its agents whose appointments they wish to continue. The correct answer is: c. 1-May

In addition to a life insurance producer license, producers selling variable products must have a(n): Select one: a. Annuity license b. Series 6 or 7 license c. Accident and health license d. Property and casualty license

Producers selling variable products must have a securities license _ series 6 or 7 _ in addition to a life insurance producer license. The correct answer is: Series 6 or 7 license.

Connecticut insurance producers are exempt from the continuing education requirement if their only line of authority is any of the following, EXCEPT: Select one: a. Travel baggage b. Credit insurance c. Mortgage guaranty d. Industrial insurance

Producers whose only line of authority is credit insurance, mortgage guaranty, or travel accident and travel baggage are exempt from the 24-hour CE requirement. The answer is: d. Industrial insurance

E&O =

Professional Liability Insurance

Creditable Coverage

Proof of prior insurance, used to reduce waiting periods and exclusions for preexisting conditions. Insurers must provide a certificate of creditable coverage to policyholders within 30 days of coverage ending, or upon the request of the policyholder within 24 months of the coverage ending. The certificate provides proof of prior insurance and guarantees issue of a new policy. The period of creditable coverage may be applied to reduce waiting periods and exclusions for pre-existing conditions by the number of months of creditable coverage. For example, if an individual has 12 months of prior creditable coverage, then the new coverage cannot impose pre-existing condition exclusions.

Long-term disability income policies

Provide long benefit periods of two years or more, or until the insured reaches age 65. The benefit amount is 60% - 80% of the insured's income. The elimination period ranges from 30 to 180 days. Long-term disability income policies may be issued as occupational or nonoccupational coverages. Long-term disability income policies may coordinate benefits with an employer plan, Workers' Compensation or Social Security. Long-term Disability = Pays for Periods Greater Than 2 years

Which of the following is not a responsibility of the insurer in individual health insurance? Select one: a. Content of health policies b. Disclosure method of policies c. Providing the applicant the Outline of coverage d. Control of marketing materials

Providing the applicant with an outline of coverage is a responsibility of the producer usually at the time of policy delivery. The correct answer is: Outline of coverage

Which of the following is false regarding taxation of distributions from qualified plans? Select one: a. Benefits are taxable as income upon withdrawal from the account. b. Distributions prior to 62 are subject to an additional 10% IRS penalty. c. Plan loans and rollovers are considered withdrawals, but are not subject to the 10% IRS penalty. d. If the plan participant becomes disabled, he or she may make early withdrawals that are subject to tax, but not the 10% IRS penalty.

Qualified plan benefits are taxable as income upon withdrawal from the account. Distributions prior to age 59 1/2 are subject to an additional 10% IRS penalty. If the participant dies, becomes disabled, or divorces, the participant may make early withdrawals, subject to tax, without penalty. The participant may also elect to take a series of equal annual payments over the remaining life expectancy. The payments are subject to taxes, but not the 10% penalty. Plan loans and rollovers also constitute withdrawals, but are NOT subject to the 10% penalty. The correct answer is: Distributions prior to 62 are subject to an additional 10% IRS penalty. The age is the only thing off about it.

Recurrent Disability

Recurrent disability occurs when the insured again becomes disabled from the SAME OR RELATED event or condition that caused the prior disability. Policies must state the terms for or whether a recurrent disability is considered an EXISTING CLAIM vs. NEW CLAIM, as well as any waiting or elimination periods associated with payment of benefits.

Which of the following is not a dividend option? Select one: a. Reduction of premium payments b. Paid-up additions c. Reduced paid-up insurance d. Cash payments

Reduced paid-up insurance is a nonforfeiture option. The correct answer is: c. Reduced paid-up insurance

Accidental Means

Restrictive definition of accident in which the cause of the accident must be unintentional and unexpected. In other words, the insured must be unaware that the risk would create a loss, and be unaware that the events leading up to the risk has the potential for loss. Example: A person decides to sit down in a chair, and notices that one of the legs on the chair is wobbly, but sits down anyway. Suddenly, the chair breaks and the person fall to the ground, breaking their tailbone. The accidental means test says that the person should have known not to sit down in a chair that was not sturdy, because it has the potential to cause an injury. In this scenario, a disability income policy with the accidental means definition would not pay benefits.

Who should use LTC?

Rich old people who don't want to bother their families. LTC insurance is especially suitable for people who have significant financial income and assets, and would not qualify for Medicaid. LTC insurance prevents individuals from depleting financial resources to pay the high cost of LTC out-of-pocket, and allows individuals to independently manage their need for LTC without relying on family members. Paying premiums for an LTC policy is financially more efficient than simply putting funds in a savings account for future LTC needs.

Although specific to the property and casualty lines, two means of obtaining group liability insurance are worthy of mention. These are:

Risk Retention groups and Risk Purchasing groups.

Rollovers

Rollovers are a transfer of funds from one IRA to another or one qualified plan into another.

What sorts of expenses are considered "eligible expenses" for a major medical policy?

Room and board for inpatient hospital stays Medical and surgical services and supplies while hospitalized Physician's expenses Nurse's fees Physical therapy Anesthesia Ambulance to and from the hospital X-rays and laboratory tests Oxygen Blood Casts, splints, braces, and crutches Wheelchair rental Durable medical equipment Prosthetics Convalescent nursing care Prescription drugs Outpatient care Dental services resulting from injury to natural teeth

For HMOs, Basic health care services include:

Room and board, General nursing care, Use of operating room and facilities, Use of intensive care unit, X-rays, laboratory, and other diagnostic tests, Maternity care, Drugs, medications, and anesthesia, and Physical, radiation, and inhalation therapy. These do not include rehabilitative or home health services. In addition, durable medical equipment is not included as a basic service.

Roth IRAs

Roth IRAs are arranged so that the withdrawals are tax-free. Unlike the traditional IRA, contributions made to a Roth IRA are not tax-deductible. You are taxed on the way in, NOT on the way out.

When does my Roth have to start paying me?

Roth IRAs do not have to begin payout by the time the participant reaches the age of 70½. Contributions to a Roth IRA can continue beyond the age of 70½.

Stranger-originated Life Insurance, or STOLI.

STOLI = Third-Party Ownership A consumer purchases a life insurance policy with the agreement that a third party agent/broker or investor will purchase the consumer's policy and receive the proceeds as a profit upon the consumer's death. The stranger may purchase the policy, naming himself or herself as beneficiary, or use it for resale to an investor. Upon the insured's death, the stranger or investor receives the policy proceeds. The insured receives some sort of small financial benefit in this arrangement.

Which federal law allows a person exchanging one life insurance policy for another to defer tax on the gains? Select one: a. Section 1035 exchange b. Tax-sheltered annuity c. Section 457 deferred compensation d. Roth IRA

Section 1035 of the Internal Revenue Code allows for tax-free exchanges of certain contracts. The correct answer is: Section 1035 exchange

Underwriting is the process that insurance companies use to:

Select, Classify, and Rate risks. Underwriting is used to classify risks and assign premium rates that accurately reflect the amount of risk undertaken by the insurance company.

Service Providers Members covered by BlueCross BlueShield are referred to as subscribers. Subscribers can add or remove family members from coverage and can transfer coverage from one city or state to another without a break in coverage.

Service providers pay benefits directly to the medical providers instead of the insured. Service providers differ from commercial insurers in that they pay benefits on a service basis, which means that the insurer pays benefits directly to the medical providers instead of the insured. Service providers differ from stock and mutual insurers in that they provide the medical services; whereas, stock and mutual insurers provide reimbursement of medical services. Furthermore, service providers contract with physicians and hospitals to provide medical services at agreed upon charges to their subscribers. In this way, BlueCross BlueShield has a contract with medical providers and subscribers.

Jamie will turn 65 in September. Which of the following statements is true regarding her enrollment in Medicare Part A? Select one: a. She will be automatically enrolled on her birthday b. She must enroll in both Medicare Parts A and B in order to receive premium-free Medicare Part A c. She will be automatically enrolled on the first day of the month in which she turns 65 d. She must apply six months prior to her birthday month in order to enroll on her birthday

She will be automatically enrolled on the first day of the month in which she turns 65 Jamie will be automatically enrolled in Medicare Part A on the first day of the month in which she reaches age 65, unless she declines coverage.

Short-term disability income policies may be issued as occupational or nonoccupational coverages. The elimination period is typically no more than 30 days. However, "short-term disability income" typically excludes ________.

Short-term Disability = Excludes Work Related Injuries One common exclusion for short-term disability policies is on-the-job injuries. Therefore, short-term disability policies will not coordinate with Workers' Compensation, since on-the-job injuries are typically not covered.

Short-term disability plans may be designed with any of the following features, EXCEPT: Select one: a. Benefits may be paid as a percent of income. b. Benefits may be paid as a flat indemnity amount. c. Benefits will coordinate with Workers' Compensation. d. Both accidents and sicknesses will be covered.

Short-term disability usually does not cover on the job losses. It does not coordinate with Workers' Compensation, since it is not a covered loss. c. Benefits will coordinate with Workers' Compensation.

Regarding disability income policy benefit periods, which of these is true? Select one: a. Shorter benefit periods offer higher policy benefits. b. Premiums are not affected by the length of the benefit period. c. Longer benefit periods have higher premiums. d. Shorter benefit periods have higher premiums.

Shorter benefit periods have lower premiums, and longer benefit periods have higher premiums. The correct answer is: c. Longer benefit periods have higher premiums. This one is actually true.

Before an HIV test can be performed, the insured must __________________.

Sign a consent form.

Joint and Survivor Options

Single life annuities provide payouts for the life of just one insured, while multiple life annuities provide payments that last for the lives of multiple annuitants. One example of a multiple life annuity is the joint and survivor annuity. A joint and survivor annuity payout option pays annuity benefits to two annuitants. If either of the two annuitants dies, payments will be made to the surviving annuitant for life. Payments stop upon the death of the surviving annuitant.

Insurable Interest

Skin in the game. A person who wants to buy a policy on another person, the policy owner, is required to have an insurable interest in the other person. Insurable interest states that an individual must have a valid concern for the continuation of the life or well being of the person insured. The continued livelihood of the insured must have significant value over the insured's illness or death. Insurable interest must exist in order for a policy to pay benefits.

A covered worker must be ______ insured to receive Social Security retirement benefits. Select one: a. Currently b. Fully c. Disability d. Disability and currently

Social Security retirement benefits are only available to covered workers who are fully insured upon retirement. The correct answer is: Fully

Uncomplicated Pregnancy and Childbirth (Common Exclusions or Restrictions)

Some health insurance policies may provide coverage for complications resulting from pregnancy or childbirth, but may exclude to cover services provided during the course of a normal pregnancy or childbirth.

Any Provider Versus Limited Choice of Providers

Some medical expense plans limit coverage of medical services to those provided by certain physicians and facilities. In those cases, the insurer provides a list of physicians and facilities to the insured. Other plans allow the insured to choose any medical provider. It is more common for insurers to limit the choice of providers. In an emergency situation, the insured is not limited to the provider list.

Multiple Indemnity Rider (Double, Triple)

Some policies may contain riders that provide for payment of double or triple the accidental death or dismemberment benefits based on the cause of death or specific type of dismemberment.

Integrated Deductible

Some supplementary major medical plans have an integrated deductible instead of a corridor deductible. The integrated deductible is incorporated into the basic plan's coverage. For example, if the supplementary plan has a $600 deductible and the insured incurs a loss of $1,000 under the basic plan, the deductible is fulfilled.## There are two types of integrated deductible, differentiated by how often the deductible applies. Calendar Year Deductible, and Per Cause Deductible. Calendar Year Deductible If the major medical plan has a calendar year deductible, the deductible amount applies once per calendar year. After the calendar year deductible is met, all other claims in that calendar year will not have a deductible applied. Per Cause Deductible On the other hand, if the major medical plan has a per cause deductible, a separate deductible applies for each separate accident or illness.

Straight Whole Life (Continuous Premium)

Sometimes called "ordinary life," is the basic whole life insurance policy, and is the most common type of whole life insurance policy sold. The face amount and premiums are level and payable over the entire life of the insured, up to the age of 100. If the insured reaches the age of 100, the policy face amount is paid out to the policyowner. The policy is said to mature or endow if this occurs. Cash values must accrue by the end of the third policy year. The insurer guarantees the cash value and death benefit. Compared to limited payment and single premium policies, straight life has the lowest premium.

Reentry term insurance

Sometimes referred to as reissue, permits the policyowner to renew a term life policy at the end of the policy period by providing evidence of insurability, so the insured can obtain a lower premium than the renewal premium that would be offered without evidence of insurability. In essence, the insured is applying for renewal coverage as if he or she was a new applicant.

Fraternals

Special types of mutual insurers/nonprofit religious, ethnic or charitable organizations that provide insurance exclusively to their members. People who are members of a fraternal benefit society tend to be the members of a fraternal organization or lodge. The lodge system has a representative form of government. Fraternal benefit societies are exempt from federal income tax and state premium tax because they are categorized as charitable organizations. Fraternal benefit societies are mostly involved in life and health insurance. An example of a fraternal benefit society is the Modern Woodmen of America.

Medicaid

State and federally-funded medical assistance program for financially disadvantaged individuals. Medicaid, also referred to as Title 19, is a dually funded welfare program through state and federal dollars for people who have limited incomes and resources to cover the cost of health care. Each state operates its own Medicaid program through its Department of Public Welfare. However, states must comply with federal regulations and guidelines. People that qualify for both Medicaid and Medicare are referred to as dual-eligible. Medicaid provides coverage for medical care and services that Medicare only partially covers, including nursing home and home health care.

Guaranty Associations

State life and health guaranty associations provide a safety net for all member life, health and annuities insurers in a particular state. Guaranty associations protect insureds in the event of insurer insolvency, or inability to pay claims. Guaranty associations protect the insurer, which in turn protects the insured. All life, health and annuities insurers within a state are required to be members of the state guaranty association, unless exempt (i.e., fraternal benefit societies and nonprofit insurers). There is a dollar limit to how much a guaranty association will pay per policy and per insured. Each state has its own set of limits, such as: $200,000 for life insurance death benefits, $100,000 for life insurance cash surrender and $100,000 for health insurance benefits. Insurance producers are not permitted to use the existence of a state guaranty association to induce a sale of insurance or annuities.

In most cases, private insurance is sold on a voluntary basis; however, some forms of insurance offered through private insurers are compulsory. Included in the private insurers are two groups of commercial insurers:

Stock insurers, and Mutual insurers. There are various types of private insurers, including: Stock insurers (commercial), Mutual insurers (commercial), Noncommercial organizations, Fraternal benefit societies, Lloyd's Associations, Risk retention groups, Risk purchasing groups, Reciprocal exchanges, Reinsurers, Assessment insurers and Excess and surplus lines.

Aside from one lump sum distribution, there are six annuity payout options:

Straight life Cash refund Installment refund Life with period certain Joint and survivor Annuity certain

Supplementary Major Medical

Supplementary major medical plans cover expenses not included under basic medical plans. Coverage is also provided for expenses in excess of basic plan dollar maximums, and for benefits that have been exhausted under the basic plan. Supplementary major medical plans pick up where the base plans leave off. In some cases, supplementary major medical plans will cover expenses excluded by base plans.

Why buy life insurance? (Think people)

Survivor Protection One of the most common reasons for purchasing life insurance is to provide financial protection for family and dependents if the insured dies. The death of either spouse can strain the financial stability of a family. Life insurance can provide a family with a stream of income to fulfill the family's basic necessities of life and current lifestyle. These needs include: Mortgage payments, Living expenses, Children's education, Health insurance, and Surviving spouse's retirement income.

While Riders can alter coverage, Riders cannot alter ______________________.

THE INSURING CLAUSE of the insurance contract, as the insuring clause contains the insurer's basic promise to pay a sum of money in the event of a covered loss to the beneficiary.

Annuities have all of the following uses, EXCEPT: Select one: a. To provide life income b. To provide retirement income c. For education funds d. To provide tax-free income

Tax must be paid on the interest earnings of annuities. The correct answer is: To provide tax-free income

Roberto's Sewing Machine Company has a group disability income policy for its employees. Premiums are entirely paid by the company. Which of the following is true regarding the benefits? Select one: a. Taxable b. Not taxable c. Only taxed if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income d. Only taxed if an individual's unreimbursed medical expenses do not exceed 10% of their adjusted gross income

Taxable When an employer pays all premiums for a group disability income policy, benefits are fully taxable to employees.

Term Life =

Temporary

Ordinary Life encompasses several types of individual life insurance, such as:

Temporary (term), Permanent (whole), Universal, Variable and Other interest-sensitive plans. Premiums are paid: Monthly, Quarterly, Semiannually, or Annually. Term life insurance provides only a death benefit within a specified period of time. Whole life insurance provides death and living benefits.

Term (Think Renewability Provisions)

Term policies are only effective for a short period, after which period the insurer cancels the policy. Term health coverages include travel accident policies and short term medical plans. Term = Not Renewable

Earned premium

That portion of the premium for which policy protection has already been given.

Because variable contracts are equity products, they are subject to various regulations. Which of the following applies to variable contracts? Select one: a. NAIC regulations b. The 12% rule c. Flexible premium amounts d. Insurance regulations only

The 12% rule prevents producers from using illustrations with projected interest rates greater than 12% to induce people to purchase policies. They are not bound by NAIC, and they are regulated as both insurance and securities. The correct answer is: b. The 12% rule

When does cash value start to accrue on a whole life policy?

The 3rd year. Due to the amount of the agent's commission in the first year and the expenses associated with effectuating a life insurance policy, permanent policies do not accrue cash value until the third policy year.

ADA (Americans with Disabilities Act)

The Americans with Disabilities Act (ADA) enacted by Congress prohibits employer discrimination of any term, condition, or privilege of employment, including insurance coverage, based on the disability of an individual. Disabled employees must have equal access to the same health insurance coverage and limitations as other employees. Coverage may not contain exclusions or limitations for the disability of the insured. The ADA included deafness, AIDs, cancer, muscular dystrophy, and kidney disease, among others, which may not be excluded or limited from coverage. The ADA only applies to employers with 15 or more employees.

Annuitant's Sex

The Annuitant's Sex: Statistically, men do not live as long as women. Because of this fact, women will typically have to pay higher premiums than men of the same age, because women are likely to live longer, and, therefore, will require more income payments. Example: Mark and Mary are both 45 when they start their annuity accumulation phases. They both expect to begin receiving income payments at age 65. Because Mary's life expectancy is longer than Mark's - she (statistically) will receive payments for a longer period of time. Her longer life expectancy results in a higher premium.

Limited Provider Choice (A feature of HMOs)

The Choice of physicians is limited to the group of medical service providers who have agreed to provide services for the agreed-upon price and to uphold the standards of the HMO. These are known as primary care physicians. A primary care physician must refer members to health care specialists. Health insurance, by contrast, does not limit the choice of physicians.

Advertising material must be filed by the insurer with the Department at least how many days prior to the date the insurer intends to use the advertisement? Select one: a. 15 days b. 21 days c. 30 days d. 31 days

The Commissioner may after reasonable notice to the insurer involved, require the filing with the Department for review prior to use, of all advertising material proposed for use by an insurer. Such advertising material must be filed by the insurer with the Department no less than 30 days prior to the date of the insurer desires to use the advertisement.

What is the maximum aggregate penalty in any six-month period for having intentionally engaged in an unfair method of competition? Select one: a. $1,000 b. $5,000 c. $10,000 d. $50,000

The Commissioner may also issue a monetary penalty not to exceed $5,000 for each intentional violation, not to exceed an aggregate amount of $50,000 in any six-month period. The correct answer is: $50,000

The Commissioner may at any time require such information as the Commissioner deems necessary with respect to a certified insurance consultant's: Select one: a. Industry standards, practices and operations b. Trade practices, guidelines and dealings c. Business methods, policies and transactions d. Sales methods, debits and credits

The Commissioner may at any time require such information as the Commissioner deems necessary with respect to the business methods, policies and transactions of the certified insurance consultant. The correct answer is: c. Business methods, policies and transactions

What is the maximum penalty per violation for having unintentionally engaged in an unfair method of competition? Select one: a. $500 b. $750 c. $1,000 d. $5,000

The Commissioner may issue a monetary penalty not to exceed $1,000 for each unintentional violation, not to exceed an aggregate amount of $10,000 in any six-month period. The correct answer is: $1,000

What is the maximum aggregate penalty in any six-month period for having unintentionally engaged in an unfair method of competition? Select one: a. $1,000 b. $5,000 c. $10,000 d. $50,000

The Commissioner may issue a monetary penalty not to exceed $1,000 for each unintentional violation, not to exceed an aggregate amount of $10,000 in any six-month period. The correct answer is: $10,000

What is the high-risk pool that provides health insurance to those who cannot manage to secure health insurance through the normal market? Select one: a. Husky b. Connecticut Life and Health Insurance Guaranty Association c. Connecticut Alternative-Health Reinsurance Association d. Connecticut High-risk Insurance Association

The Connecticut Alternative-Health Reinsurance Association... ...is a nonprofit legal entity comprised of all insurers and self-insurers selling health insurance in Connecticut. The association is a high-risk pool and provides health insurance to those who cannot manage to secure health insurance through the normal market. The minimum standard benefits include coverage for catastrophic illness with a lifetime maximum of $1 million. The coinsurance limit may not exceed 20% for the insured, while the plan pays 80%. There are three deductible options: $200, $500, or $750 per person. The sum of any deductible and copayments may not exceed the maximum limit of $1,000 per individual and $2,000 per family.

The purpose of the Connecticut Life and Health Insurance Guaranty Association is to: Select one: a. Maintain competitive and fair insurance pricing b. Police insurance companies in Connecticut c. Protect against policyholders from insolvent insurers d. Ensure consistency in insurance contracts

The Connecticut Life & Health Insurance Guaranty Association is a group of licensed insurance companies created by the legislature in 1989. The purpose of the association is to protect policyholders of policies issued by an insolvent insurance company, up to specified limits.

Consumer Rights

The FCRA requires that applicants receive a notice upon policy application that a credit report may be performed. Consumers have the right to know what is in their credit reports and who has obtained their credit report within the prior year. If an insurer declines to offer coverage or must modify the coverage as a result of the information provided in a consumer or investigative report, the insurer must provide the consumer with the name of the credit reporting agency and address. Consumers have the right to dispute a credit report requiring the credit-reporting agency to perform a reinvestigation. If the credit report is discovered to be inaccurate, the report must be corrected and sent to all parties who received a credit report from the agency within the prior two years. A credit report that prompts an adverse action must be provided to the consumer with a statement of the consumer's rights in writing prior to carrying out the adverse action.

When must disclosures be made to consumers according to GLBA (Gramm-Leach-Bliley Act)?

The GLBA defines collection of information as that which is organized by a person's name or personally identifiable number, such as a Social Security number or insurance policy number. The GLBA protects against the disclosure of nonpublic personally identifiable information. The first disclosure must be made when the customer relationship is established. Two disclosures must be made to customers. The first disclosure must be made when the customer relationship is established. This occurs when a consumer becomes a customer, such as when an insurance policy is purchased. At this time, the company provides the customer with their privacy policies. The company must provide customers with an update of privacy policies on an annual basis. The second disclosure must be made before disclosure of protected information. At this time, the company must provide the customer with an opportunity to opt-out of this disclosure, and instructions for how to opt-out. The disclosure will indicate to what the opt-out applies. The opt-out must be in writing.

Which of the following provisions must be included in a long-term insurance policy? Select one: a. Probationary period of no longer than 180 days b. Guaranteed renewability c. Surgical fees d. Coverage for drug dependency

The Health Insurance Portability and Accountability Act (HIPAA) mandated that all long-term care policies must be guaranteed renewable. The insurer cannot cancel the policy and must renew coverage each year so long as the insured pays the premiums. The correct answer is: Guaranteed renewability

Which law protects the coverage of individuals and their families when they change or lose their jobs? Select one: a. COBRA b. HIPAA c. TEFRA d. ERISA

The Health Insurance Portability and Accountability Act (HIPAA) was passed by Congress in 1996 to protect the coverage of individuals and their families when they change or lose their jobs. The correct answer is: b. HIPAA

Which of the following is not an annuities classification that fits into the structure and design of an annuity? Select one: a. Funding methodInterest rates are fixed during both phases of the annuity. Each payment amount is fixed, and premiums are invested in the insurer's general account. The correct answer is: Fixed interest rates during the payout period b. Date income payments begin c. Law of large numbers d. Investment configuration

The Law of Large Numbers is not a classification that is part of the structure and design of an annuity. The correct answer is: c. Law of large numbers

NAIC

The National Association of Insurance Commissioners (NAIC) is a membership association of state insurance commissioners. The purpose of the organization is to advance the uniformity of regulation between states in insurance matters without encouraging the imposition of federal regulation. The NAIC does not have legal authority, but has done much to promote the standardization of insurance laws and regulations among the states including the model laws for individual accident and sickness policy provisions, standard valuation laws, and nonforfeiture benefits.

NAIFA

The National Association of Insurance and Financial Advisors, or NAIFA, is an association that works for the best interest of policyholders and seeks to broaden the opportunity and advancement of the individual agent. NAIFA represents the interest of insurance professionals and advocates for a positive legislative and regulatory environment, enhanced business and professional skills and the promotion of ethical conduct of insurance professionals.

How did the PPACA regulations change lifetime and annual limits on the dollar value of benefits?

The PPACA dictated that health plans MAY NOT establish lifetime limits on the dollar value of benefits for any participant or beneficiary or any unreasonable annual limits. 105 million Americans no longer have a lifetime dollar limit on essential health benefits. Annual dollar limits are set at increasingly higher amounts until January 1, 2014 when most plans issued or renewed are banned from having an annual dollar limit on coverage.

What is the PPACA (Obama Care)?

The Patient Protection and Affordable Care Act is a federal law signed by President Obama in 2010 as part of the United States health care reform. The PPACA is more commonly referred to as Obama Care. The purpose of the Act was to hold insurance companies accountable, lower health care costs, guarantee options for consumers, and provide better health care for all Americans. Some highlights of the Act include: Guaranteed issue; Community rating - insurers must charge the same premium to all applicants of the same age, sex and geographical location, regardless of preexisting conditions; Medicaid eligibility is broadened - individuals and families whose incomes are up to 133% of the federal poverty line; Small businesses are provided a tax credit to provide health coverage to employees; Lower premium costs; Competitive private health insurance market - via state exchanges; and Children ages 18 to 26 can be covered under their parents' health plans.

Which of the following laws defined a security product? Select one: a. Securities Act of 1933 b. Securities Act of 1934 c. Investment Company Act of 1940 d. None of the above

The Securities Act of 1933 ruled that applicants for a variable product must receive a prospectus. It also laid out a clear definition of a security product. The correct answer is: a. Securities Act of 1933

Pregnancy Discrimination Act

The United States Congress passed the Pregnancy Discrimination Act in 1978 as an amendment to the sex discrimination section of the Civil Rights Act of 1964. Coverage of pregnant women must receive the same treatment by employers as other physical conditions. Conditions related to pregnancy include childbirth, medical conditions related to childbirth, and abortion. Regarding abortion, it is not a requirement that a pregnant woman be in immediate danger in order to have an abortion and that abortion must be covered under her employer health plan just as any other medical condition would be. The Pregnancy Discrimination Act states that discrimination on the basis of pregnancy, childbirth, or related medical conditions constitutes unlawful sex discrimination under Title VII, which covers employers of 15 or more employees, including state and local governments.

-Accidental Death and Dismemberment Rider (AD&D)

The accidental death and dismemberment rider may be added to a life insurance policy to pay benefits for dismemberment. The loss must occur within a certain time period of the accident, such as 90 days. The accidental death and dismemberment rider pays a principal sum if the insured loses any of the following due to an accident: Both hands Both arms Both legs Vision in both eyes AD&D Rider = Pays Principal Sum

-Accidental Death Benefit Rider or Multiple Indemnity

The accidental death benefit (ADB) rider, also referred to as a multiple indemnity rider, pays an additional sum, termed the principal sum, to the beneficiary if the insured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple. Each policy stipulates how an accidental death is defined. Furthermore, the insured must die within a certain time period of the accident, usually 90 days. The rider usually excludes death from accidents occurring while the insured is at war, committing a crime, or is in an aviation incident, other than in a regularly scheduled commercial flight. The ADB typically expires when the insured reaches a certain age, such as 65. The ADB does not build cash value and only multiplies the policy's face amount. If a policy's face amount is increased by dividend options, then the ADB only applies to the original policy face amount. Accidental Death Rider = Only For Accidental Death

Accumulation at Interest

The accumulation at interest option allows the insurer to retain the dividend to be invested and grow in value. The dividend earns a rate specified in the policy. The policyowner can withdraw the dividend at will tax-free, but any interest earned on the dividend is taxable. Dividends left to accumulate at interest are separate from the policy's cash value.

Normal Retirement Age

The age (65 years), when a person is entitled to Social Security retirement benefits regardless of employment status.

Attained Age

The age of the insured upon policy conversion/increase of coverage, i.e., NOT the original age at the time of application.

Explaining Coverage to Client Personal delivery of the policy is a good practice, as it allows the agent to explain the coverage to the insured, such as the riders, provisions, and options. Personal delivery establishes a good relationship with the insured, building trust that the agent has the insured's best interest in mind.

The agent should explain if any changes were made to the contract, such as modified coverage or premium rate. Additionally, the applicant must receive a document explaining the coverage purchased and the names of the insurer and agent. In life insurance, this document is called the policy summary. In health insurance, it is called the outline of coverage.

How do they calculate how much I get from Social Security benefits?

The amount is based on the your individual average monthly wage during your working years. The primary insurance amount (PIA) is used to establish the benefit. It is EQUAL to the worker's full retirement benefit at age 65. Individuals who retire early receive a reduced retirement benefit for the rest of their life because the benefits are paid for a long period of time.

A flexible premium arrangement is similar to a level premium annuity, except that the owner of the annuity can elect to pay varying amounts for each premium payment.

The amount of each premium payment must fall within a certain minimum and maximum amount. An annuity where both the premium amount and frequency of premium payments are flexible is called a flexible premium deferred annuity (FPDA). Flexible premium annuities are appropriate for individuals who have fluctuating incomes, or who are unable to pay for an annuity in one lump sum. The major drawback of flexible premium annuities is the inability to determine the actual amount of the annuity benefit. Because the amount of each premium payment to be paid and the total amount that will be paid into the annuity is a flexible amount that depends on future premium payments, there is no way to determine the exact amount of the annuity benefit that will be received until the final premium payment is received.

When determining annuity premiums, insurers consider five important factors:

The annuitant's age, The annuitant's sex, Assumed interest rate, Income amount and payment guarantee, and Loading costs.

For individual health insurance policies, legal action may be taken against the insurer for up to ____ years from the date proof of loss is provided to the insurer. Select one: a. 1 b. 3 c. 5 d. 7

The answer is: b. 3 years

Annette and John are married and have an annuity in which payments will reduce to 2/3 of the original amount upon the death of the first annuitant. What annuity do they have? Select one: a. Joint life annuity b. Joint and 2/3 life annuity c. Joint and 1/2 life annuity d. Joint and survivor annuity

The answer is: b. Joint and 2/3 life annuity

A qualified plan that is a combination of a defined contribution and defined benefit plan, in which a set contribution amount is made is called a: Select one: a. Tax-sheltered annuity b. 401(k) c. Money-purchase pension plan d. Target benefit pension plan

The answer is: d. Target benefit pension plan

Applicant

The applicant is the person applying for the policy who fills out the application to be submitted to the insurer.

Julie applies for a health insurance policy. Her consideration consists of: Select one: a. Application b. Initial premium c. Statements made on the application and initial premium d. Statements made on the application and promise to pay premiums

The applicant's consideration consists of the statements made on the application to the best of the applicant's knowledge, and the applicant's initial premium. The correct answer is: c. Statements made on the application and initial premium

Applications for group policies are brief and include:

The applicant's name, Social security number, Residential address, Any dependents, and Named beneficiaries.

The beneficiary can't be changed if the designation is: Select one: a. Irrevocable b. Revocable c. Estoppel d. Convertible

The beneficiary can't be changed if the beneficiary designation is irrevocable. The correct answer is: Estoppel

Beneficiary

The beneficiary is the named person or persons who receive policy benefits. Beneficiaries can be primary or contingent. Primary beneficiaries are first to receive any benefit payouts, while contingent beneficiaries are beneficiaries that receive benefits in the event the primary beneficiary is unable to do so (i.e. had predeceased the insured).

Benefit Payment Clause

The benefit payment clause is the provision that describes how and when benefits are paid. Disability policies generally make periodic payments of disability income benefits, while hospital, medical, and accidental death and dismemberment policies make lump sum payments.

What are the elimination periods and benefit periods for LTC?

The benefit period of an LTC policy is the maximum period that benefits will be paid to an insured. Many LTC policies have an elimination period similar to that found in a disability income policy, after which LTC benefits begin. Longer benefit periods will have more expensive premiums. In the case of LTC, the elimination period is usually 30 days or longer, during which period the insured must be confined to a nursing facility. LTC policies with longer elimination periods have lower premiums. Most policies have a maximum benefit period of three to five years; however, some policies do not have a limit. In other cases, the benefit period may be expressed as a per-stay maximum and a lifetime maximum. Policies with longer benefit periods will have more expensive premiums. Elimination Period = 30 Days or Longer

What policy can be described as annual renewable term with a cash value account? Select one: a. Universal life b. Adjustable life c. Decreasing term d. Modified whole life

The cash value in a universal life policy must continually cover the cost of death protection (cannot reach zero); otherwise, the policy will expire after its grace period lapses. In this way, universal life policies are simply annual renewable term with a cash value account.

All of the following are guaranteed features in a variable life insurance policy, EXCEPT: Select one: a. Death benefit b. Cash value c. Premium rate d. Period of death protection

The cash value is invested in the insurer's separate account, and is, therefore, not guaranteed. The correct answer is: Cash value

The ________ provision refunds 60 to 80% of the insured's premiums and interest in cases where premium payments far exceed claims paid. Select one: a. Return of premium b. Cash surrender value c. Impairment rider d. Cost of living adjustment rider

The cash value surrender rider refunds 60 to 80% of the insured's premiums and interest in cases where premium payments far exceed claims paid. This benefit is only paid when the disability income policy is terminated. The correct answer is: Cash surrender value

Risk

The chance of a loss occurring.

Children's Term Rider

The children's term rider permits children to be insured under term rider protection on a life insurance policy for a certain length of time. Children's term riders usually expire when children reach the age of 18 or 21. When children reach the limiting age, they are usually given the option to convert their term coverage to whole life. Biological, step and legally adopted children can be insured under term riders.

While investigating a current claim, an insurance company learns the insured claimant had not included their full medical history on the application and that the current claim results from a condition that was probably pre-existing 4 years ago, when the application was approved. The company will: Select one: a. Reduce the percentage of payment for the current claim b. Pay the current claim, but void the policy, based on misrepresentation c. Deny payment of the claim and cancel the policy, based on misrepresentation d. Pay the claim

The company may not refuse to pay the claim because of the time limit that is placed on pre-existing conditions and misstatements. In most states, after the policy has been in force for 3 years, the insurer may not refuse to pay claims using the misrepresentation or pre-existing conditions defense. The correct answer is: Pay the claim

In Connecticut, payment of an accelerated benefit does not affect the: Select one: a. Life benefit b. Accidental death benefit c. Sickness benefit only d. Health and sickness benefit

The company may set a minimum amount for the accelerated benefit, but in no case shall it be more than 25% of the face value of the policy. The accidental death benefit, if any, in the policy shall not be affected by the payment of the accelerated benefit. The correct answer is: b. Accidental death benefit

Comparing life insurance is not as simple as determining which policy has lower premiums. Dividends and cash values complicate the comparison. There are two primary methods for comparing the cost of life insurance policies that have cash value or dividends:

The comparative interest rate method and The interest-adjusted net cost method.

Comprehensive Major Medical Benefits

The comprehensive policy covers almost all medical expenses under one policy. The base plan in comprehensive plans includes medical, hospital, and surgical coverage.

Consideration Clause

The consideration clause describes the promises exchanged between the insured and the insurer as evidenced by the payment of premiums, statements made by the insured in the application, and the insurer's promise to pay benefits under the terms of the policy. The consideration clause is usually on the policy face in the frequency of premium payments provisions. Consideration = Premiums + Application Key Point: Consideration Clause tells the policyowners responsibility to pay the premiums, premium payment frequency, coverage start date, and the policy's length of time.

Intoxicants or Narcotics (Common Exclusions or Restrictions)

The consumption of alcohol or illegal drugs is a common exclusion in most accident and health insurance policies. The insurer is not liable for any loss or injury in consequence of the insured's being intoxicated or under the influence of any narcotic, unless administered on the advice of a physician.

Conversion Period (From Group Life to Individual Life)

The conversion period is 31 days after termination from group coverage. This means the individual must apply for individual coverage within 31 days after the date of group coverage termination. The conversion option must be exercised during the conversion period, and the individual is covered under the group policy throughout the conversion period. The conversion period is limited to a maximum of 60 days from the date of group coverage termination. If the individual is not made aware of their conversion rights, then a 15-day extension period is granted to convert the coverage. If the individual dies during the conversion period, the full death benefit will be paid by the insurer, regardless of whether the application for individual coverage was submitted.

Which of the following is a Medicare supplement additional benefit? Select one: a. Medicare Part A copayments for approved hospital charges for the 60 lifetime reserve days b. Blood deductible c. Medicare Part B deductible d. Medicare Part A copayments for approved hospital charges during the 61st through 90th day of hospitalization

The core benefits include: -Medicare Part A copayments for approved hospital charges during the 61st through 90th day of hospitalization; -Medicare Part A copayments for approved hospital charges for the 60 lifetime reserve days; -approved hospitalization costs for 365 extra days after all Medicare benefits have been exhausted; -coverage for the blood deductible (first three pints); -and the 20% Medicare Part B coinsurance. The correct answer is: c. Medicare Part B deductible

What are the core benefits of a Medigap Plan?

The core benefits must include: -Part A copayments for approved hospital charges during the 61st through 90th day of hospitalization -Part A copayments for approved hospital charges for the 60 lifetime reserve days -Approved hospitalization costs for 365 extra days after all Medicare benefits have been exhausted -Coverage for the blood deductible (first three pints) -The 20% Part B coinsurance

Which of the following is not true about the impact of the annuitant's sex on the premium payments? Select one: a. Men live more dangerously so their premiums are higher. b. Women live longer than men, so their premiums are higher. c. Both of the above. d. Neither of the above.

The correct answer a. Men live more dangerously so their premiums are higher. This is what is NOT TRUE. I.e., Women live longer than men, so their premiums are higher. This is TRUE>

#Note: The test makers like to trick you by asking: Which of the following is NOT a major risk factor in determining a premium? A.) Mortality B.) Interest C.) Expense D.) Age/Sex.

The correct answer is D.) Age/Sex. They want to trick you with the Age/Sex answer. They seem like major factors, but remember they are not the major factors. The major factors are MIX (Mortality/Interest/Expenses). The mortality factor takes the persons age and sex into consideration so they are not major risk factors.

Martha turned 65, so she is eligible to enroll in Medicare Part B, but she is continuing to work and has a group plan. What should Martha do? Select one: a. Enroll in Medicare Part B immediately, since she may have restrictions later when she retires b. Decline Medicare Part B and pay the higher premium later, since it will be secondary to her group plan c. Obtain a certificate of insurance from her employer when she retires and Medicare will waive the penalties for late enrollment d. Not do anything, since enrollment in Medicare Part B is automatic

The correct answer is: Obtain a certificate of insurance from her employer when she retires and Medicare will waive the penalties for late enrollment As long as Martha can provide proof of coverage from a creditable group plan, she may delay enrollment in Medicare Part B until she retires.

Which of the following is not a nonforfeiture provision of an annuity contract if the contract owner decides to surrender the annuity and stop making payments before the annuity payout phase begins? Select one: a. The annuity can be surrendered for its cash value minus a surrender charge or expense deduction. b. The insurer can annuitize the contract based on the amount of cash at that point. c. The taxes on a lump sum payment can be waived if the annuitant is over 55. d. None of the above

The correct answer is: The taxes on a lump sum payment can be waived if the annuitant is over 55. If the surrender of a policy for a lump sum occurs prior to the annuitant reaching 59 1/2 years of age, a 10% tax penalty will apply, in addition to the surrender charge.

Of the following provisions, which protects against inflation? Select one: a. FIO rider b. COLA rider c. Relation of earnings to insurance d. FIO and COLA riders

The cost of living rider (COLA) allows the insured's disability income benefits to increase to offset the effect of inflation. The correct answer is: COLA rider

There are three income periods that need to be considered when determining the proper amount of life insurance for a family:

The dependency period, Preretirement period, and Retirement period. Family Dependency Period: Children are dependent upon parents for financial support. Typically, the amount of income needed is greatest during the family's early years, when the children are young. Social Security Survivors benefits may provide the surviving spouse with income while caring for children under the age of 16. Preretirement Period: Children are no longer dependent upon parents for financial support. Retirement Period: The surviving spouse no longer earns income. Retirement benefits start.

What is a disadvantage of fixed annuities? Select one: a. Knowing the exact amount of each annuity payment b. Potential for higher interest earnings c. Earning potential may not be enough to offset the effects of inflation d. Investment in the insurer's separate account, which has the potential for higher yields

The downside to fixed annuities is that the earning potential may not be sufficient to offset the effects of inflation. A variable annuity can address this problem. The correct answer is: c. Earning potential may not be enough to offset the effects of inflation

Many LTC policies have an elimination period similar to that found in a disability income policy, after which LTC benefits begin. What are they like?

The elimination period is usually 30 days or longer, during which period the insured must be confined to a nursing facility. The elimination period could be as little as 0 and as much as 365 days. LTC policies with longer elimination periods have lower premiums.

Required Provision 1: Entire Contract and Changes

The entire contract between the parties CONSISTS of the policy, any endorsements, and the application, if attached. Any change to the policy must be made by an executive officer of the insurer with the consent of all parties to the contract. No agent has the authority to make changes to a policy. Entire Contract = Policy + Endorsements + Application

Which of the following terms describes the portion of the periodic annuity benefit that is taxed? Select one: a. Estate tax b. Seven-pay test c. Exclusion ratio d. None of the above

The exclusion ratio is used to determine what portion of annuity payments is taxable. The correct answer is: Exclusion ratio

Execution Clause

The execution clause states that the policy is executed (established) when all parties to the contract have met the policy's conditions.

Extended Term Option

The extended term option permits the policyowner to use the policy's cash values to buy paid-up term insurance. The cash values act as a single premium to purchase the extended term coverage, and the amount of the paid-up coverage is equivalent to the original policy's face value. The length of the term protection is based on the amount of cash value in the original policy and the insured's age at the time the extended term is purchased. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing extended term coverage. The insurer institutes the extended term option by default if the policyowner cannot be reached after the grace period lapses or if the policyowner does not select a nonforfeiture option. However, if the insured has a rated policy, meaning the insured is a higher risk, the insurer will typically not offer the extended term option because of adverse selection. With the extended term option, the original policy may be reinstated within the terms of the reinstatement provision.

Decreasing term insurance provides a face amount that decreases to zero over the policy period. How does it work?

The face amount equals zero on the day the policy expires. The premiums are level. Some decreasing term insurance is convertible, but is usually not renewable upon policy expiration because the face amount is zero at the time of policy expiration. The convertibility feature in a decreasing term policy allows the policyowner to convert the term coverage to permanent coverage at any point during the policy period at the amount of the coverage at that point in time. A common use for decreasing term insurance is mortgage protection to pay off the mortgage in the event that the debt is outstanding when the insured dies.

The face of a policy providing long-term care benefits must include all the following disclosures, EXCEPT: Select one: a. Solicitations b. Tax consequences c. Accelerated benefits amounts d. Effect of the benefits payment

The face of a policy providing long-term care benefits must include the following disclosures: descriptive title, tax consequences, solicitations, and effect of the benefits payment. c. Accelerated benefits amounts

Family Term Rider

The family term rider combines the spouse and children's term rider in one rider. When a family term rider is added to permanent coverage, then the family term rider is level term.

Fixed-amount Installments

The fixed-amount installment option uses an annuity to pay the policy proceeds, but the payment amount is specified instead of the period of time. Payments consist of principal and interest and are paid until the principal and interest reach zero. The length of time installments will be paid is based on: The amount of the policy proceeds, The amount of each payment, and The interest rate. The larger the payment amount, the shorter time period payments will be received. More favorable interest rates will lengthen the payout period. This settlement option guarantees that the entire amount of the policy proceeds will be paid out. If the beneficiary dies before the balance reaches zero, then a contingent beneficiary will receive the remaining payments.

Fixed-period Installments or Period Certain

The fixed-period or period certain, installment option use an annuity to pay the policy proceeds to the beneficiary for a certain number of years. Payments consist of principal and interest, and the principal reduces to zero by the end of the period. The amount of each installment is based on: The length of the period, The amount of the policy proceeds, and The interest rate. Longer payment periods result in lower payments. Income is guaranteed for the entire period specified, so if the recipient dies before the period ends, then a contingent beneficiary would continue to receive payments until the period lapses.

Flat Dollar Deductible

The flat dollar deductible is the stated dollar amount the insured must pay. The flat dollar deductible must be paid before the policy will pay benefits. A family deductible is typically three times the amount of the individual deductible. Therefore, if three members of a four-member family satisfy the individual deductible amount, there is no additional deductible for the fourth family member.

Consumer Reports Prohibited Information

The following information may not be included in consumer reports unless the consumer credit report is requested for life insurance policies with a face amount of $150,000 or more: Bankruptcies dating back more than 10 years Civil suits and judgments dating back more than seven years or cases in which the statute of limitations has expired, whichever period is longer Tax liens dating back more than seven years Adverse information dating back more than seven years Reports of a consumer's arrests, indictments or convictions

What is Open Enrollment for HMOs?

The following open enrollment provisions only apply to group HMO enrollment: -All group HMOs must have a period of open enrollment at least once per year where they advertise availability of the HMO to the general public on an individual basis. -During the open enrollment period, which typically lasts 30 days, new individuals are allowed to enroll in the HMO and the HMO may NOT reject any applicant for health reasons. -Pre-existing conditions CANNOT be excluded. However, some states do have laws that permit HMOs to exclude certain individuals during the enrollment period who are hospitalized or have a chronic illness or permanent injury.

Connecticut regulations regarding illustrations do not apply to life insurance with no illustrated death benefits on any individual exceeding: Select one: a. $5,000 b. $10,000 c. $20,000 d. $25,000

The following regulation regarding illustrations applies to all group and individual life insurance policies except: variable life insurance, individual and group annuity contracts, credit life insurance or life insurance with no illustrated death benefits on any individual exceeding $10,000.

1035 Policy Exchanges

The gains on exchanges of life insurance policies, endowments, or annuities are, in most cases, subject to taxation. Section 1035 of the Internal Revenue Code allows for certain exchanges without recognizing a gain or loss for tax purposes. The following exchanges may occur without tax consequences: Life insurance policies may be exchanged for another life insurance policy or endowment. Endowments may be exchanged for another endowment. Annuities may be exchanged for another annuity. In summary: exchanging things of like kind usually has no tax consequence

What is the purpose of the guaranteed insurability rider in a disability income policy? Select one: a. The insured may receive a refund of premiums paid if the policy's benefits were not utilized by age 65. b. The insured may increase disability income benefits without increasing the premium. c. The insured may purchase additional coverage at certain points in time, or at certain ages. d. The insured's policy is guaranteed renewable until age 65.

The guaranteed insurability rider (GIR) allows the insured to buy additional disability income coverage without proving evidence of insurability. The insured is usually eligible to purchase additional coverages at certain ages specified in the policy, or upon life events, such as marriage or the birth of a child. The correct answer is: The insured may purchase additional coverage at certain points in time, or at certain ages.

-Guaranteed Insurability Rider (GIR)

The guaranteed insurability rider (GIR), sometimes referred to as the future increase option, permits the policyowner to buy additional permanent life insurance coverage at specific points in time in the future (i.e., marriage, births, etc.) without requiring the insured to provide proof of insurability. If the future increase option is not exercised within a specified time period, such as 90 days, of each option age, then the option is forgone. The added coverage is rated at the insured's attained age. Each policy specifies how much additional coverage can be purchased. The GIR is not exclusive of other riders, so if the policyowner has the waiver of premium rider and the GIR, it is possible for both riders to be exercised simultaneously. The guaranteed insurability rider usually drops off when the insured reaches the age of 40. Guaranteed Insurability = Increase Coverage without Proof of Insurability

Guaranteed Insurability Rider

The guaranteed insurability rider, also referred to as the future increase option, can be attached to disability income policies because the benefit amount is fixed, so costs remain level. The guaranteed insurability rider allows the insured to purchase ADDITIONAL disability income COVERAGE at future dates regardless of insurability. The rider specifies the date and the amount of additional coverage and may be subject to other limitations, depending on the state and the policy.

All of the following options are available if the only logical beneficiary is a minor, EXCEPT: Select one: a. A guardian can be appointed. b. The benefits can go directly to the estate of the insured. c. A trust can be established. d. The insurance company can hold the proceeds until the minor comes of age.

The guardian, trust and insurance company holding the proceeds are all options if a minor is a beneficiary. The correct answer is: The benefits can go directly to the estate of the insured.

Annuitant

The individual whose life the annuity has been issued, and the person who receives annuity payments.

Residual Disability

The insured has a total disability and returns to work but can only perform SOME of the duties he could perform prior to the disability. Synonymous with "permanent partial disability."

What does it mean if a policy uses an "Any Occupation" definition to establish total disability?

The insured must be unable to perform the work duties of ANY occupation for which he is qualified by education, experience, or training. More restrictive than the own occupation definition of total disability. Example: If a surgeon owned a disability income policy with the "any occupation" definition of disability and lost their left hand in a boating accident, the policy would not pay benefits. Even though the surgeon cannot perform the duties of a surgeon, the surgeon may be able to teach medical school courses. Harder to get benefits for this, because you can usually find some kind of related work.

What does it mean if a policy uses an "Own Occupation" definition to establish total disability?

The insured must be unable to perform the work duties of his/her own occupation. Less restrictive than the any occupation definition of total disability, and is reserved for individuals with specialized training, such as surgeons. Coverage is limited to the first two years after the disability begins.

Required Provision 10: Physical Examination and Autopsy

The insurer - at its own expense - has the right and opportunity to examine the person or autopsy of the insured when reasonably required while a claim is pending. The insurer has the right to have an autopsy performed on the insured if not prohibited by law. Autopsy = Paid By Insurer

Who count as the parties to an insurance contract?

The insurer and the applicant(s). Beneficiaries and insureds, if a person(s) other than the applicant, are not parties to the contract.

Optional Provision 11: Intoxicants and Narcotics

The insurer is not liable for any loss or injury in consequence of the insured's being intoxicated or under the influence of any narcotic, unless administered on the advice of a physician.

Optional Provision 10: Illegal Occupation

The insurer is not liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony or to which a contributing cause was the insured's being engaged in an illegal occupation.

Optional Provision 8: Cancellation

The insurer may cancel the policy at any time by written notice delivered to the insured stating cancellation is not effective until at least five days later. After the policy has continued beyond its original term, the insured may cancel the policy at any time by written notice stating cancellation is effective upon receipt or later. The insurer must return the unearned portion of any premiums paid if a policy is canceled. In the event of cancellation, the insurer must return the unearned portion of any premium paid. If the insured cancels, the earned premium is calculated on a short-rate basis. If the insurer cancels, the earned premium will be computed pro rata. Cancellation has no effect on any claim prior to the effective date of cancellation. Pro rata return of premium is used when the insurer cancels a policy and means the insurer's earned premium is kept, and the unearned premium is returned to the insured. Short-rate return is used when the insured cancels a policy and means the insurer is permitted to retain the earned premium and a portion of the unearned premium. The balance of unearned premium is returned to the insured.

Statement of Good Health

The insurer may require a statement of good health that verifies that the insured has not become ill, injured or disabled during the policy approval process (the time between the application and delivery of the policy), or if the applicant did not submit the initial premium with the application. Unless otherwise directed by the insurer, the agent should not deliver the policy if the insured's health has worsened. In this case, the agent should notify the insurer and proceed with the insurer's instructions.

Who pays for a medical examination (while an insured is living) or an autopsy (for a deceased insured)?

The insurer pays.

George bought a $300,000 whole life policy when he was employed as a bank teller. Four years later, he changes jobs and begins working in a coal mine. If he is killed while working in the mine, what will the insurer do? Select one: a. Deny the claim because the insured's occupation listed in the application did not match the insured's actual occupation b. Void the policy c. Void the policy and return all premiums with interest to the insured's beneficiary d. Pay the claim

The insurer will pay the claim. If an exclusion or limitation was not placed on the insured's application upon policy issuance, the insurer will be required to pay the claim. The correct answer is: d. Pay the claim

Required Provision 6: Claim Forms

The insurer, upon receipt of the notice, must furnish the forms for filing proofs of loss. 15 days = Claims Forms must be provided If the forms are not provided within 15 days, the claimant will be deemed to have complied with the policy's requirements for proof of loss upon submitting written proof of the occurrence, as well as the character and the extent of the loss for which a claim is made.

Which of the following is a way that insurers manage risk? Select one: a. Benefit Payment Clause b. Consideration Clause c. Probationary Period d. Insuring clause

The insuring clause states the insurer's commitment to pay benefits. The benefit payment clause is the provision that describes how and when benefits are paid. The consideration clause describes the promises exchanged between the insured and the insurer as evidenced by the payment of premiums . The Probationary Period is a risk management tool. The probationary period protects the insurer from paying claims caused by an insured's preexisting conditions. The correct answer is: Probationary Period

Interest-adjusted net cost method

The interest-adjusted net cost method is used more frequently and is more accurate because it accounts for interest.

The Law of Agency

The law of agency states that the acts of an insurance agent are deemed the acts of the insurer.

All of the following are true regarding the lifetime benefits provision in disability income policies, EXCEPT: Select one: a. The lifetime benefits provision prolongs the disability income policy benefit period beyond the age 65 cutoff to the insured's entire life. b. The provision usually requires that the insured is totally disabled prior to age 65. c. The disability must be caused by accidental injury. d. Policies that pay lifetime benefits for sickness usually require that the disability occur prior to the insured reaching the age of 55.

The lifetime benefits provision prolongs the disability income policy benefit period beyond the age 65 cutoff to the insured's entire life. The provision usually requires that the insured is totally disabled prior to age 65. Some policies specify that the disability must be caused from accidental injury, while other policies include both accidental injury and sickness. Policies that pay lifetime benefits for sickness usually require that the disability occur prior to the insured reaching the age of 55. The correct answer is: The disability must be caused by accidental injury.

How much is the maximum annual benefit for a defined benefit plan? Select one: a. $50,000 b. $80,000 c. $220,000 d. $250,000

The maximum annual benefit for defined benefit plans is $210,000. The correct answer is: $210,000

What is the maximum contribution for a defined contribution plan? Select one: a. $55,000 b. $100,000 c. $195,000 d. There is no limit.

The maximum annual contribution under a defined contribution plan is $55,000.

An individual age 49 and below can contribute what maximum amount to a 403(b) plan? Select one: a. $18,500 b. $22,000 c. $35,000 d. $49,000

The maximum contribution to a 403(b) plan for individuals age 49 and below is $18,000 as of 2019. The correct answer is: $18,500

Maximum Family Benefit

The maximum family benefit is the maximum monthly amount a covered worker and their family can receive. The maximum family benefit may be reached if a covered worker and their families are receiving Social Security Survivors' and disability benefits. This limit is indexed annually.

How is the miscellaneous expenses coverage under basic hospital medical expenses paid? Select one: a. A fraction of the room and board benefit b. A multiple of the room and board benefit c. The room and board benefit d. None of the above

The miscellaneous or ancillary benefit under basic hospital medical expense policies covers all other costs aside from room and board. The miscellaneous benefit is stated as a multiple of the daily room and board limit. The correct answer is: A multiple of the room and board benefit

Nondisabling Injury

The nondisabling injury benefit pays medical expenses caused by an accidental injury that does not cause total disability. This benefit does not pay disability income benefits. The benefit is a one-time payment that is limited to a percentage of the disability income benefit, stated in the policy.

Equity indexed universal life works the same way as universal life, EXCEPT: Select one: a. The nonguaranteed indexed rate can reach yields of 30% or more. b. The interest rate is tied to the stock market. c. Equity indexed universal life policy had a fixed guaranteed interest rate. d. Normally insurers use the S&P 500 Index for their rates.

The nonguaranteed indexed rate can reach yields of 15% - 20%. The rates are tied to the market, usually the S&P index, and the product also has a fixed guaranteed interest rate. The correct answer is: a. The nonguaranteed indexed rate can reach yields of 30% or more. This is FALSE.

How does is managed care "managed"?

The organization uses the power of a large group of guaranteed subscribers to secure reduced fees from doctors and other medical providers. They structure plan rules so they encourage preventative care (free annual checkups and screens, for instance) and early diagnoses, thereby reducing the major costs involved in treatment. They monitor use of the plan in order to cut down on needless hospitalizations and treatments or overlong hospital stays.

The agent must provide an outline of coverage for a health policy to the applicant: Select one: a. Upon application only b. Upon policy issuance c. Upon policy delivery only d. Upon application or policy delivery

The outline of coverage must be provided to applicants upon policy delivery at the latest. d. Upon application or policy delivery

Parol Evidence Rule

The parol evidence rule prevents parties to a contract from changing the meaning of a written contract by introducing oral or written statements made prior to the formation of the contract that are not part of the contract. Statements made after the formation of the contract, with the effect of modifying the contract, are not subject to the parol evidence rule.

All the following are required to qualify for Medicare's nursing facility benefit, EXCEPT Select one: a. The patient must spend at least three days in a hospital within past 30 days. b. The patient's physician must certify that skilled care is required. c. The patient must enter a Medicare-certified skilled nursing facility. d. The patient must meet stated income limits.

The patient must meet stated income limits. There is no income limit on this covered service. All the rest are true.

Payor Riders

The payor rider is used for juvenile life insurance. The payor rider states that if the individual paying the premiums becomes disabled or dies before the child reaches a certain age, such as 21 or 25, the policy premiums will be waived until the child reaches the specified age. The policy will stay in force while the premiums are waived. This rider protects parents or guardians who purchase life insurance on their children from lapsing coverage if they become disabled or die before the child is of age to assume policy ownership. Juvenile policies use Payor Riders.

A health insurance plan shall make available to Connecticut residents, in addition to any other conversion privilege available, a conversion privilege under which coverage shall be available: Select one: a. Immediately upon termination of coverage under the group plan b. Within a reasonable time after termination of coverage under the group plan c. Within 15 days after the termination of coverage under the group plan d. Within 30 days after the termination of coverage under the group plan

The plan must make available to Connecticut residents, in addition to any other conversion privilege available, a conversion privilege under which coverage will be available immediately upon termination of coverage under the group plan. The terms and benefits offered under the conversion benefits must be at least equal to the terms and benefits of an individual comprehensive health care plan.

Required Provision 2: Time Limit on Certain Defenses and Incontestability

The policy becomes incontestable and cannot be voided or claims denied after two years (three years in some states), except in the case of fraud. The following defenses may not be used after the incontestable period for voiding a policy or denying or reducing a claim: Misstatements, except fraud, made by a policyowner in the policy application, Sickness or physical condition (other than what is specifically excluded in the policy) that existed prior to the effective date of coverage of the policy. Pre-existing conditions cannot be excluded after two years from the date the policy is in force. 2 (or 3) years = Incontestability

The basic components of insurance contract are

The policy face, Insuring clause, Conditions, and Exclusions.

Group Term Life (most commonly offered as annual renewable term.)

The policy is issued for one year and may be renewed annually without evidence of insurability at the discretion of the policyowner. The insurer may increase premiums each year, if necessary, to offset the group's experience rating. Upon the anniversary date of the group term master policy, the insurance company may adjust the premium in order to bring the group policy in line with current mortality rates and operating expenses. Regardless, this is the most cost-effective way of providing group life insurance.

Period of Time for Renewal

The policy must state in the renewal provision the period of time provided to the insured to renew coverage. Depending on the policy and the state, the insurer may require the insured to renew coverage by submitting an application to the insurer or merely payment of the premium after the expiration date of the initial policy.

Withdrawals or partial surrenders can be made on the cash value of a universal life policy. Which of the following is specified in the policy? Select one: a. Timing on repaying the withdrawal b. The amount of tax on the withdrawal, if it is over basis c. How much can be withdrawn d. How to convert the withdrawal to a loan

The policy will specify how much can be withdrawn, at what frequency the withdrawals can be made, and the service charges applicable to the withdrawal. There is no presumption that the withdrawal will be repaid. The correct answer is: c. How much can be withdrawn

Policyowner

The policyowner (synonymous with policyholder) is the person who has all ownership rights under the policy (such as assignment and naming beneficiaries), pays premiums and accepts the policy when delivered. In most cases, the policyowner is the applicant.

Group contracts are between the insurer and the policyowner.

The policyowner is the: Employer, Association, Labor union, Trusteeship, or Any type of eligible group.

What portion of an annuity's death benefit is taxed? Select one: a. The portion that exceeds the cost-basis b. The premiums plus interest c. The premiums d. Death benefits are never taxed.

The portion of the annuity death benefit that is taxed is the amount that exceeds the cost-basis (premiums accumulated during the pay-in period). The correct answer is: a. The portion that exceeds the cost-basis

Term to age 65 policies cover the insured to age 65. How does it work?

The premiums are level throughout the term of the policy. At the start of the policy, the policyholder pays a higher premium than he or she would for a shorter-term policy in order to build up extra cash reserves that keeps the premiums level until policy expiration. The insured has the option of converting the policy to a cash-value policy before the insured reaches a specified age in the policy. Term-to-65 = Option to Convert to Cash-Value Policy

The period of time between an employee's coming to work at a firm that offers group health insurance to its employees and the time when he or she is covered by that insurance is called: Select one: a. Probation period b. Grace period c. Waiver period d. Elimination period

The probation period is the time between the time an individual is employed by a company and the date at which he or she becomes eligible for group health and life insurance. The correct answer is: Probation period

Fraud and False Statements

The purpose of Fraud and False Statements legislation is to provide punishment for people who willfully engage in insurance fraud or make false statements that affect insurance business and interstate commerce. Commissioners, insurers, agents, and employees of insurers are subject to the provisions of the act.

Disability Income Insurance

The purpose of disability income insurance is to provide disabled individuals with periodic income while they cannot work. Disability income insurance prevents individuals from depleting their personal savings to afford the normal costs of living in addition to the medical expenses associated with disability. -Periodic income benefits are paid to the insured. -Benefits are a stated dollar amount based on a percentage of the insured's lost income. -Most disability income policies are guaranteed renewable to age 65. -Benefits are paid after an elimination period or "time deductible."

National Conference of Insurance Legislators (NCOIL)

The purpose of the National Conference of Insurance Legislators, or NCOIL, is to help state legislators make informed decisions regarding insurance issues, to improve the quality of insurance regulation, and to combat the federal government from encroaching on each state's control of insurance regulations.

Reduced Paid-Up Option

The reduced paid-up insurance option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the amount of the policy cash value. The cash value acts as a single premium to purchase reduced paid-up insurance. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. In other words, the reduced paid-up nonforfeiture option provides continuing cash value build up, even though the policyholder is no longer contributing any money into the policy. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. Key points about the reduced paid-up option: The policy is paid-up with the cash value used as a single premium to purchase the reduced face amount coverage. No more premium payments are made. The insured's attained age is used to determine the amount of reduced paid-up coverage. Reduced paid-up insurance is the same type of whole life coverage as the original policy, except all policy riders are eliminated.

Adrian bought an annuity for herself. After a few years, she begins to receive annuity payments. When she dies, her best friend will receive the balance of principal. Which of the following annuities best describes the annuity Adrian bought? Select one: a. Refund life b. Straight life c. Joint and survivor life d. All of the above

The refund life annuity pays for the entire life of the annuitant. If the annuitant dies before the premiums in the annuity have been paid out, then a beneficiary will receive the balance. The correct answer is: a. Refund life

How do PPACA restrictions on annual limits apply to account-based plans?

The restriction on annual limits applies differently to certain account-based plans, especially where other rules apply to limit the benefits available. For example, under section 9005 of the Affordable Care Act, salary reduction contributions for health flexible spending arrangements (health FSAs) are specifically limited to $2,500 (indexed for inflation) per year, beginning with taxable years in 2013. These interim final regulations provide that the PHS Act annual limit rules do not apply to health FSAs. The restrictions on annual limits also do not apply to Medical Savings Accounts (MSAs) and Health Savings Accounts (HSAs). Both MSAs and HSAs generally are not treated as group health plans because the amounts available under the plans are available for both medical and non-medical expenses. Moreover, annual contributions to MSAs and HSAs are subject to specific statutory provisions that require that the contributions be limited.

-Return of Cash Value Rider

The return of cash value rider allows a whole life policy's cash value to be included in the death benefit. Similar to the return of premium rider, this rider doesn't actually return the policyowner's cash value; instead, the rider provides the additional benefit through an increasing term rider that always equals the policy's cash value. The return of cash value rider was created as a response to policyowners who misunderstood how cash value in permanent life insurance accrues interest to equal the policy face amount.

-Return of Premium Rider

The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy. The death benefit is comprised of the face amount plus the total premiums paid into the policy. Most policies drop the return of premium rider when the insured reaches age 60. The return of premium rider is simply an increasing term rider that matches the total premium input. This rider can be costly because as the insured ages, the cost of term protection increases.

Subrogation

The right of the insurer to assume the rights of the insured and sue the responsible third party for damages inflicted upon the insured. Subrogation primarily applies to property and casualty, and seldom to life and health insurance.

The risks insured under life insurance policies with long-term care benefits provisions are considered primarily: Select one: a. Mortality risks b. Morbidity risks c. Essential risks d. Acceptable risks

The risks insured under long-term care benefits, riders and life insurance policies with long-term care benefits provisions shall be considered primarily mortality risks rather than morbidity risks; therefore, such riders and policies are considered to provide life insurance benefits. In the absence of a contractual provision within the policy that payment of long-term care benefits will cease upon the termination of the policy, the long-term care benefits shall continue to be paid.

If a small employer carrier ceases marketing to small employers, how much time must it wait before being allowed to reenter the small employer market again? Select one: a. 2 years b. 3 years c. 4 years d. 5 years

The small employer carrier is prohibited from reentering the small employer market for a period of 5 years from the date of the notice. d. 5 years

Spouse & Other-insured Term Rider

The spouse other-insured term rider gives term protection for a specific period of time and amount. The rider typically expires when the spouse/other-insured reaches a certain age, such as 65.

Which of the following statements is not true about the guaranteed insurability rider (GIR)? Select one: a. This rider provides specific dates on which additional life insurance policies can be bought. b. If the option is not exercised within 90 days of the specific time, the option is forgone. c. After a certain age, the rider may not be able to be purchased or added. d. The older the insured gets, the more frequent the purchase option dates.

The statements are true, EXCEPT "the older the insured gets, the less frequent the dates to purchase the option become." A GIR will provide specific dates on which additional life insurance policies can be bought; if that option is not exercised within 90 days of the specific time, the option is forgone; after a certain age, the rider may not be able to be purchased or added. But you don't get more frequent changes to add coverage just because you're older. d. The older the insured gets, the more frequent the purchase option dates.

The blackout period

The time during which a surviving spouse is ineligible to receive Social Security Survivors benefits. pThis period occurs once an unmarried child reaches the age of 16, and until the age of 18 or 19, if attending high school full time. Social Security benefits are paid to the child, not the widow. At the earliest, the blackout period ends when the surviving spouse reaches the age of 60. Regardless of age, if a dependent child is disabled, the surviving spouse may be eligible to receive Social Security Survivors benefits.

Optional Provision 6: Relation of Earnings to Insurance - Average Earnings Clause

The total monthly amount of loss of time benefits may not exceed the amount of monthly earnings of the insured at the time the disability began or the average amount of monthly earnings for the previous two years, whichever is greater. The average earnings clause may not reduce the total monthly amount of benefits payable to less than $200. This provision prevents the insured from malingering, which is intentionally staying disabled in order to continue to receive disability income benefits. Insurers don't want it to be profitable for insureds to remain disabled.

Traditional net cost method

The traditional net cost method projects policy premiums for a certain number of years. The cash value and any dividends are subtracted, so the result shows the average premium cost per year. This method does not account for interest.

How does waiver of premium work for LTC benefits?

The waiver of premium provision waives premiums WHILE an insured is receiving LTC benefits. After a specified time period, such as 90 or 180 days of confinement, premiums are waived. After the insured ceases LTC, premium payments resume. Elimination periods are counted on: -A service day basis (days receiving care) OR -Calendar day basis (days are counted once an individual is eligible for LTC benefits).

In order to obtain fully insured status, a covered worker must accrue one quarter of coverage each calendar year after the age of 21 for a total of 40 quarters (about 10 years of work) and a minimum of six quarters, upon the earliest of:

The year prior to reaching age 62; The year of disability onset; or The year prior to death. Once a person has attained fully insured status, that person is fully insured for their entire life.

How much is the Social Security disability benefit payable to a covered worker? Select one: a. 1/4 their PIA b. 1/2 their PIA c. 3/4 their PIA d. Their PIA

Their PIA Under Social Security disability benefits, a covered worker will receive monthly payments in the amount of their PIA. At the earliest, the disabled covered worker may be eligible to receive Social Security disability benefits upon the sixth month of disability.

The full retirement age is 65 for covered workers who were born in 1937 or earlier. The full retirement age increases for individuals born between the years of 1938 to 1959, with the maximum retirement age set at age 67 for covered workers who were born in 1960 or later. The earliest a person can begin to receive Social Security retirement benefits is age 62. If a person retires early, the retirement benefits are reduced for their entire life based on the individual's full retirement age. What would the reductions be for someone born in 1937 or earlier who retired at 65? For someone born in 1960 or later who retired at 67?

Their retirement benefits would be reduced by 20% for their entire life if they were born in 1937 or earlier and had a full retirement age of 65. Their retirement benefits would be reduced by 30% for their entire life if they were born in 1960 or later and had a full retirement age of 67.

How many mandatory provisions are there in all individual health insurance policies? How many optional provisions?

There are 12 mandatory provisions and 11 optional provisions. The mandatory provisions must be incorporated in all individual health insurance policies, while the optional provisions may be included at the discretion of the insurer.

Ways to settle dividend payment

There are five dividend options: Cash Payment Reduction of Premium Payments Accumulation at Interest One-year Term Option Paid-up Additions

How many ways are there to handle risk?

There are five ways to handle risk: Avoidance, Retention, Sharing, Reduction and Transfer.

The two types of flexible spending accounts are: Select one: a. MSAs and HSAs b. HRAs and HSAs c. Qualified medical expense account and dependent care expense account d. None of the above

There are two types of FSAs available: qualified medical expense account and dependent care expense account.

Which policy has fixed premiums, a guaranteed minimum death benefit and nonguaranteed cash values? Select one: a. Whole life b. Universal life c. Variable whole life d. Variable universal life

These are all characteristics of variable whole life insurance. Universal life and variable universal life insurance have flexible premiums. The correct answer is: c. Variable whole life

Indeterminate premium whole life policies

These policies provide a lower initial premium that can fluctuate up to a maximum premium as stated in the policy. -The lower initial premium is guaranteed to the policy owner for a specified period of time. -After such period, the insurer has the liberty to charge up to the maximum stated premium. -Insurers are required to include a statement in the policy that the policy's nonguaranteed premium is lower than a fixed premium whole life policy with the same amount of coverage and for the same risk class. Applicants are required to sign a separate form affirming that they understand the elements of the indeterminate premium whole life policy including the following: -Premium is variable, -A lower premium is not guaranteed, -The maximum premium as stated in the policy may be charged, and -Dividends in participating policies are only paid to policy owners if the insurer declares a dividend.

Consumer Reporting Agencies

They compile and maintain credit information about consumers nationwide, and issue credit reports to third parties who have a valid business need for the information. Examples: MIB, Experian and Equifax. Consumers have the right to request removal of their name and address from lists provided to consumer reporting agencies for any consumer report that was not commenced by a credit or insurance transaction of the consumer. Credit reporting agencies must provide consumers with a way to notify agencies that they do not want their information used. This includes providing consumers with a toll-free number to call. Consumers notifying agencies by phone can request a two-year hold on information; however, if a request is made in writing, the hold on information is permanent unless withdrawn by the consumer.

Military Suspension Provision

This provision is designed to protect active duty and reserve members of the armed forces. Individual plans might suspend coverage (and premium) during active military service. When no longer serving, these individuals would be permitted to resume coverage and premiums. Policies that have a military service exclusion or provision for suspension of coverage MUST STATE whether premiums are reduced or refunded or coverage is suspended for the period of service.

Group Permanent Life

Though less frequently used, group whole life insurance offers permanent protection for insured members under the group. The types of group whole life insurance used most often include: Group ordinary, Group paid-up, and Group universal life. A group ordinary plan is any group life plan that builds cash value. The employer pays for the insurance portion of the policy in a group permanent plan. In most policies, the employee owns the cash value. In some, if the employee terminates employment, the cash value is forfeited. Group paid-up combines term and whole life. The employer pays the term insurance. The employee purchases single-premium whole life. The combination of the employer-purchased term life and employee-purchased whole life equals the policy's face amount. With group universal life insurance, employees pay the majority of policy premiums and, therefore, have specific rights of ownership that are not provided in-group ordinary insurance.

The Policy Face

Title page of the contract, contains the following information: The named insured, Policy number, Policy issue date, Policy limits, Premium amount, Premium due dates, A right of examination statement (right to return the policy), and Signatures of the insurer's secretary and president are also part of the policy face.

How do I know if my life insurance policy is a MEC or at risk of becoming a MEC? Modified Endowment Versus Life Insurance: Seven-pay Test

To determine whether a life insurance policy is a modified endowment contract, the IRS developed the seven-pay test under TAMRA, the Technical and Miscellaneous Revenues Act. To pass the test, the premiums paid during the first seven years of the policy may not exceed the total amount of level annual premiums that would pay-up the policy in seven years. If the policy fails the seven-pay test, it is considered a modified endowment contract. If the policy death benefits are increased, the policy undergoes an additional seven-pay test. The earliest age at which a life insurance policy may endow is age 95. The 2001 C.S.O. tables increase that age to 120.

Agents should be aware of two methods used to compare insurance policies. These are the:

Traditional net cost method Interest-adjusted net cost method

Assignment Clause =

Transfers Ownership Unique to life insurance, policyowners have the right to transfer policy rights to another person or entity. Assignment does not change the named insured or the face amount of the policy. Assignment merely transfers or changes the ownership rights to the policy.

Transplants Coverage (in Health Insurance Policies)

Transplant coverage may be offered in some health insurance policies. It may be included in the policy coverage, or added as a rider. The terms of coverage vary from policy to policy.

True of false: LTC benefits are not available through Medicare.

True. You have to get LTC (long term care) benefits either through an individual policy, a group policy, or as a rider on a life insurance policy.

All the following statements about Medicare and Medicare supplement are correct, EXCEPT: Select one: a. Associations (e.g., fraternal) and groups may not offer supplemental Medicare coverage to their members who are age 65 or over. b. If individuals work beyond age 65 and remain under their employer's group health plan, Medicare may be a secondary payer. c. Medicare supplement insurance is most often purchased from private insurers. d. Medicare is a secondary payer to employer plans for individuals who have Medicare because of a covered disability.

Truth is, associations and groups MAY offer supplemental Medicare coverages to their members who are age 65 and over. This coverage is most often purchased from private insurers. The other statements are correct. The correct answer is: Associations (e.g., fraternal) and groups may not offer supplemental Medicare coverage to their members who are age 65 or over.

Inducing a policyholder to switch insurance companies without regard to bad consequences is: Select one: a. Boycott b. Churning c. Twisting d. Defamation

Twisting is knowingly making misleading representations or incomplete or fraudulent comparisons of insurance policies in order to induce a person to lapse, forfeit, surrender, terminate, retain, assign, or convert a policy in order to sell a policy for another company. The correct answer is: c. Twisting

Twisting

Twisting is the unethical act of persuading a policyowner to drop a policy solely for the purpose of selling another policy without regard to possible disadvantages to the policyowner. By definition, twisting involves some kind of misrepresentation - or "twisting" of the truth - by the producer to convince the policyowner to switch insurance companies. Often, it involves encouraging an insured to lapse on their current policy and to take out another.

Premium Collection

Typically, the initial premium accompanies the application submittal. If not, the applicant has made an invitation to offer, and the premium must be collected when the policy is delivered. After the initial premium, subsequent premiums are payable in advance.

Excess and Surplus Lines

Unauthorized insurers. Excess and surplus lines insurers provide insurance for risks that authorized insurers cannot insure or do not have a market to insure. They are not subject to the rate and form laws that standard market insurers are subject to, which means the insurer can offer flexible coverage without needing to file rates and forms with the state insurance department.

Individuals who are over the age of 80 applying for an LTC policy must:

Undergo a physical exam, Undergo an ADL evaluation, Provide medical records and Provide an attending physician's statement.

State government insurance includes:

Unemployment insurance, Workers' Compensation and State Children's Health Insurance Programs (SCHIP).

Unfair Discrimination

Unfair discrimination is the unequal application of the principles used to approve, rate, set premiums, and issue insurance policies. In general, they state that no insurance producer may unfairly discriminate between individuals of the same class and equal expectation of life in the rates charged for the policy or between individuals of the same class and of the same hazard in the amount of premium rates, in any manner whatsoever.

The Unfair Trade Practices Act is divided into two parts:

Unfair marketing practices and Unfair claims practices.

Required Provision 12: Change of Beneficiary

Unless the policyowner makes an irrevocable designation of beneficiary, the right to change a beneficiary is RESERVED TO THE POLICYOWNER and does not require the consent of the beneficiary. If the beneficiary designation is irrevocable, the beneficiary must consent to any changes in the policy.

What is the difference between group coverage and a franchise plan?

Unlike group insurance, each individual insured under a franchise plan is issued an individual policy. In this way, franchise coverage is not technically "group coverage." Applicants must complete an individual application. Coverage offered includes: medical, surgical, hospital, and disability income. The group as a whole pays only one premium.

When must the insurer give an applicant the notice regarding replacement? Select one: a. During or immediately after the sales presentation b. On acceptance of the first premium c. Prior to policy delivery d. At policy delivery

Upon determining that a sale will involve replacement, an insurer, other than an insurer using direct response solicitation methods, or its agent shall provide the applicant prior to issuance or delivery of the individual long-term care policy a notice regarding replacement. The correct answer is: PRIOR to policy delivery

Insured's Estate

Upon the insured's death, life insurance and any accumulated dividends are includable in the insured's gross estate for federal estate tax purposes.

Which term correctly describes a nonscheduled plan of charges for basic surgical plans? Select one: a. Usual, customary and reasonable b. Relative value c. Absolute value d. None of the above

Usual, customary and reasonable surgical charges are based on average charges in a particular geographic area. The correct answer is: Usual, customary and reasonable

Usual, Reasonable and Customary Charges (as Conditions of a Policy)

Usual, reasonable and customary charges are where the insurer pays an amount for each procedure or treatment based on the average charges in that geographic area. If a policy uses the terms usual, reasonable, or customary charges, or any other similarly ambiguous terms, the policy must define those terms in the policy.

Which of the following is true with regards to a Variable Universal life policy? Select one: a. The policyowner has no say in the investment choices, but can choose the premium payment b. The policyowner controls the investment choices and the premium amounts c. The insurer controls the investment choices in their general account d. The death benefit fluctuates, but only the insurer has a say in premium choices

Variable Universal Life Polices allow the policyowner to control the investment of cash values and select the timing and amount of premium payments. The correct answer is: b. The policyowner controls the investment choices and the premium amounts

Variable Insurance

Variable insurance is comprised of variable life and variable annuities. Variable insurance products invest premium dollars in securities, which carry more risk due to price fluctuations. Requirements of selling variable products are a securities license and a life insurance producer license.

Which life policy offers the owner the opportunity to invest in products such as money -market funds, long -term bonds and the stock market? Select one: a. Adjustable Life b. Term Life c. Variable Life d. Universal Life

Variable life offers the policy owner the opportunity to invest in equities, bonds and money - market products. The correct answer is: c. Variable Life

Which of the following policies allows the policyowner to buy term and direct the investments made in the cash value account? Select one: a. Variable b. Universal c. Variable universal life d. Equity indexed universal life

Variable universal life is universal life insurance with a separate account. The correct answer is: c. Variable universal life

Waiver and Estoppel

Waiver is surrendering a known right. Waiver occurs intentionally and voluntarily. Estoppel is the legal process of preventing one party from reclaiming a right that was waived. For example, an insurer that waives the right to exclude death caused by involvement in war cannot later go back and reaffirm the right. The insurer is said to be estopped from reasserting the waived right.

Waiver of Premium =

Waives Premium for Total Disability

When a juvenile covered by a payor rider reaches the specified age, what happens to the ownership of the policy? Select one: a. It stays with the original policyholder. b. The policy expires. c. The premium is reduced. d. The juvenile can assume ownership of the policy.

When a child covered on a payor rider reaches the specified age, he/she can assume ownership of the policy. The correct answer is: The juvenile can assume ownership of the policy.

Policy Proceeds Paid While the Insured is Alive

When a life insurance policy is surrendered for its cash value, taxes apply to any portion of the proceeds that exceed the cost basis. Policy proceeds received as an accelerated death benefit or viatical settlement for chronically or terminally ill insureds are not subject to federal income tax. However, for chronically ill insureds there is a maximum amount, indexed annually, that may be tax-sheltered for an accelerated benefit

A person becomes eligible for Medicare when: Select one: a. Part A is automatic for all persons reaching Age 65. b. Part B is only available for those who have reached the fully insured status. c. There are no exceptions to the age 65 rule. d. If a person retires at age 59 1/2, they may request a special exception.

When a person reaches age 65 they become eligible for Medicare Part A, even if they continue to work. a. Part A is automatic for all persons reaching Age 65.

In Connecticut, what duty does the insurer have if a policyowner requests an acceleration? Select one: a. Supply the requested money within 3 days b. Supply the requested money with a statement from the IRS c. Provide a statement on the effects of the acceleration d. Schedule a meeting with the policyowner to discuss implications

When a policyowner/certificateholder requests an acceleration, the insurer shall send a statement to the policyowner/certificateholder, assignee and irrevocable beneficiary showing any effect that the payment of the accelerated benefits will have on the policy's cash value,

underwriting for group policies

When insurers underwrite group coverage, the following are important considerations: -Groups are underwritten as a whole, not based on individual members within the group. -Groups are selected and rated based on the group's average age, proportion of men to women, and occupation. -Insureds under a group policy are typically classified according to their employment (e.g., full-time, part-time, seasonal, salaried, etc.) By classifying employees, the employer decides which class of employees is eligible for coverage. -Seasonal and part-time employees are typically not eligible. -Each individual enrollee does not have to prove evidence of insurability, unless enrolling after the group enrollment period. Insureds under a group policy are typically classified according to their employment status. By classifying employees, the employer decides which class/classes of employees are eligible for coverage. Their job responsibilities, union or non-union status or department can classify employees. Employees may not be classified based on their sex or age.

The payment of premiums provision stipulates:

When premium payments are due, How they must be paid, and To whom they must be paid. The premium mode is stipulated.

When replacement is involved in a life insurance transaction, what must a producer give to the applicant? Select one: a. Copy of the state laws regarding replacement b. Notice Regarding Replacement of Life Insurance c. A summary of the replacement regulations d. A comparison of all aspects between the old and new policies

When replacement is involved in a life insurance transaction, the producer must give to an applicant a Notice Regarding Replacement of Life Insurance and turn the application in to the replacing insurer. b. Notice Regarding Replacement of Life Insurance

Multiple Employer Trust (MET)

When several employers form a trust fund to reduce the tax effects of providing employee benefits, especially life insurance.

ABC employer pays the entire cost of the group health insurance premiums. Which of the following is true regarding the taxation of premiums and benefits? Select one: a. Premiums are tax-deductible to the employer and benefits are taxable to the employees. b. Premiums are not tax-deductible to the employer and benefits are tax-free to the employees. c. Premiums are tax-deductible to the employer and benefits are not taxable to the employees. d. Premiums are paid with after-tax dollars and benefits are taxable as ordinary income.

When the employer pays the premiums for a group health insurance policy, the employer can tax-deduct the amount of premiums paid. Employees do not pay taxes on medical expense benefits received. The correct answer is: c. Premiums are tax-deductible to the employer and benefits are not taxable to the employees.

Lump Sum

While most disability income policies are paid in monthly installments, benefits may also be paid as a lump sum. If a benefit is paid in a lump sum, it must be paid immediately after written proof of loss. If the benefit is paid in periodic payments, it must be paid no less than monthly.

Limited Payment

With a limited payment (LP) whole life policy, the insured is covered for their entire life, but premiums are paid for a limited time. -The face amount and premiums are level. -The insurer guarantees the cash values and death benefit. -If the insured lives to the age of 100, the policy matures and the policyowner is paid the face amount. -Limited payment policies are suitable for clients who do not want to pay premiums for their entire lives or people who are nearing retirement with liquid capital who don't already have permanent life insurance. Common examples of limited payment policies are: 20-pay life or 25-pay life, where premiums are paid for 20 or 25 years, respectively Life paid up at 65, in which case all premiums are paid by the time the insured reaches age 65 Differences from a straight life policy: -The Policy is paid-up prior to the age of 100 -Premiums tend to be higher -Premium-paying period is shorter -Cash value accumulates more quickly

Of the following, who will receive the largest monthly annuity benefit from a $100,000 single premium immediate annuity with 5-year period certain: Jane, age 40; Paul, age 40; or William, age 70? Select one: a. Paul b. Jane c. William d. Each receives the same amount

With a period certain annuity payout option, the monthly periodic benefit is based on the amount of the annuity upon annuitization and the length of the period certain. The annuitant's age and sex are not factors. The correct answer is: d. Each receives the same amount

An insurance company may increase the premium on an individual disability, guaranteed renewable policy for any of the following reasons, EXCEPT: Select one: a. The morbidity tables change for his group. b. The pool of insureds in his group has more disabilities than expected. c. He has a disability that pays out more benefits than he paid in premium. d. Company reserves must increase due to increased claims overall.

With guaranteed renewable policies, a company is allowed to increase rates based on the morbidity tables changing, or if the group that constitutes the pool for all who have the same type of policy and experience (claims) are more than were originally anticipated. The insurer CANNOT increase rates because an INDIVIDUAL has a disability that pays out...etc. c. He has a disability that pays out more benefits than he paid in premium.

At least how many hours of continuing education each licensing period must be for each line of authority held by the producer? Select one: a. 3 hours b. 4 hours c. 5 hours d. 6 hours

With respect to continuing education requirements, a minimum of 6 hours is required for each line of authority held by the producer. The correct answer is: 6 hours

At least how many hours of continuing education each licensing period must relate to ethics and Connecticut law and regulations? Select one: a. 3 hours b. 4 hours c. 5 hours d. 6 hours

With respect to continuing education requirements, at least 3 of those hours must relate to ethics and Connecticut law and regulations. The correct answer is: a. 3 hours

Interest Only

With the interest only option, the insurer retains the policy proceeds, which become the principal, and pays out only the growth on the principal to the beneficiary on a scheduled basis, such as monthly or annually. The principal is paid out in cash or via another settlement option at some point in the future. A minimum guaranteed interest rate is quoted to the beneficiary. In many cases, the interest only option is used in tandem with other settlement options, especially in situations where more than one person is receiving payments from the policy proceeds. Sometimes the policyowner will specify the beneficiary's right of withdrawal of the principal, such as after a certain number of years or upon a certain age. If the beneficiary dies before the funds are depleted, then a contingent beneficiary will receive payments.

Which of the following is false regarding flexible spending accounts? Select one: a. Withdrawals from a flexible spending account can be made through a flexible spending account debit card. b. Flexible spending account funds are not subject to the use-it or lose-it rule. c. Flexible spending accounts are tax-advantaged savings accounts in which funds are used for qualified medical expenses and dependent care. d. Flexible spending accounts can be offered with an employer cafeteria plan.

Withdrawals from a flexible spending account (FSA) can be made through an FSA debit card. Funds in an FSA are subject to the use-it or lose-it rule, where all the funds must be used in the plan year. The correct answer is: Flexible spending account funds are not subject to the use-it or lose-it rule.

Which of the following is not an employer administered health plan? Select one: a. Workers' Compensation b. 501(c)(9) trusts c. Cafeteria Plans d. METs and MEWAs

Workers' Compensation is administered by the states. The correct answer is: Workers' Compensation

Required Provision 5: Notice of Claim

Written notice of claim must be given to the insurer within 20 days of the loss, or as soon as reasonably possible. 20 Days = Notice of Claim Notice given by or on behalf of the insured or beneficiary to the insurer or any authorized agent is deemed as proper notice.

Required Provision 7: Proof of Loss

Written proof of loss must be provided to the insurer within 90 days after the date of loss. 90 Days = Proof of Loss Failure to furnish proof does not invalidate or reduce the claim if it was not reasonably possible to give proof within such time, as long as proof of loss is provided to the insurer as soon as reasonably possible. In no event, except in the absence of legal capacity, may proof of loss be submitted later than one year from the date proof of loss was initially required.

Can I give Life Insurance as a gift? If I do, will it be taxed?

Yes and yes. Life insurance given as a gift may be subject to a Federal Gift Tax, which is paid by the giver of the gift. Currently, individuals are allowed to give other individuals gifts of up to $14,000 per person per year WITHOUT BEING TAXABLE. Married couples are allowed to give individuals gifts up to $28,000 per person per year (double). Life insurance given as a gift may be subject to a gift tax, which the giver pays. If a person gives a life insurance policy and all incidents of ownership as a gift, it may be taxable at the current replacement or cash value UP TO THE AMOUNTS exceeding the federal gift limits. (e.g., if the value is less than 28k/year from a married couple, it won't be taxed. ) Individuals may also make a gift of a life insurance policy by paying premiums. The policy is owned by the donee, but the donor pays premiums. Again, the premium payments are taxable only up to those amounts exceeding the federal gift limits. So the issue isn't the nature of the gift, but the value of the gift.

Can LTC policies be canceled?

Yes, LTC Policies can be cancelled for nonpayment, but for NO other reason (e.g., advanced age, Deteriorating health).

Do I get taxed on my Social Security benefits as income?

Yes, if you get a certain amount. Social Security benefits are subject to federal income tax if the beneficiary files an individual tax return and their annual income is greater than $25,000.

Should an underwriter for health insurance ask about moral hazards?

Yes. An applicant's lifestyle and habits also have an effect on risk selection and classification. A careless or accident-prone person may pose a higher risk to the insurer. Alcohol abuse and drug use are red flags for the insurer.

Can Small Employers get affordable benefit plans for their employees?

Yes. Employers with few employees, usually less than 25 or 50 depending on state law, can establish a small employer health plan. This allows small employers to offer standard benefit plans to their employees, which prior to legislative changes for small employers, were too expensive to operate.

Should an underwriter for health insurance ask if the applicant has any medical conditions?

Yes. For example, a person who has chronic headaches and migraines may have a neurological condition that needs medical attention at some point in the future. For example, a person who is extremely underweight or overweight may also pose a higher risk to the insurance company. While past surgeries and other physical conditions of the insured do materially affect the insurer's decision to accept or decline a risk, any childhood diseases the insured had do not materially affect the insurer's decision.

Can a life insurance policy be paid out in cash?

Yes. Life insurance benefits are based on a cash payment of the face amount stipulated in the policy. Valued policies - pay a stated amount. Both apply to life insurance.

Should an underwriter for health insurance ask about occupation?

Yes. An applicant's occupation is important for predicting the likelihood and severity of a disability. Some occupations, such as office jobs, pose little threat for disability. While others, such as construction workers, factory workers and mine workers expose people to a wide array of hazards - chemicals, heavy machinery, or precarious work conditions. Insurance companies classify occupations into five classes: AAA, AA, A, B, and C. The AAA class is for professional workers and those who work in an office. The lower classes (B and C) are for more hazardous occupations. The premium for health insurance policies is directly affected by an occupation's degree of hazard. Applicants with less hazardous occupations have lower premiums. Applicants with more hazardous occupations have higher premiums.

Do LTC policies have age limits?

Yes. Each policy is different, but many have a minimum age of 50 and a maximum of 89 for purchasing an LTC policy.

Are there special limits imposed on how much commission an agent can make on renewals of LTC policies?

Yes. For the first year's commission, insurers may not pay agents more than 200% of the renewal commission for the second year.

Do HMOs have a service area limit?

Yes. The HMO service area is a defined geographic area to which services are limited. To be eligible to enroll in the HMO, an individual must reside within this area, which generally is fairly small.

Could my life insurance policy be subject to the Federal Estate Tax?

Yes. The face amount of a life insurance policy may be INCLUDED in the taxable estate of the deceased and subject to federal estate tax in one or more of the following situations: -If the deceased was the owner of the policy or an incident of ownership occurred at the time of death. An incident of ownership is one or more rights of owning a policy, including the rights to surrender the policy for cash value, change the beneficiaries, borrow or take loans against the policy, or assign or transfer the policy. -If the deceased's estate is the policy's designated beneficiary. -If the deceased gifted, assigned or transferred ownership of the policy within three years prior to the date of death.

Can I roll a Traditional into a Roth?

Yes. Traditional IRAs may be converted (rolled over) to Roth IRAs as long as taxes are paid on the contributions that were deducted.

Some employers contract to provide group coverage to employees. Can they legally exclude entire classes of employees? Can they legally exclude individual employees because of medical history or health conditions?

Yes; No. While employers may legally exclude entire classes of employees, employers may not exclude employees on an individual basis or because of medical history or health conditions. Can Exclude = Entire Classes Can't Exclude = Individuals or Medical History

What's the general rule for getting Federally taxed on personally owned insurance?

You're either taxed on the way in or on the way out. If the premiums are tax-deductible, the benefits are taxed as income. If the premiums are not tax-deductible, the benefits are tax-free, as long as they do not exceed the actual cost of medical expenses.

The penalty for unfair marketing or claims practices is typically

a cease and desist order.

Once the insurer receives notice of the insured's death and receives the death certificate, the insurer must pay the claim within

a certain number of days, usually 60. The death benefit is paid to the beneficiary. If there is no beneficiary, the death benefit is paid to the insured's estate. 60 Days = Payment of Claims

coordination of benefits

a group health insurance provision that specifies how the insurers will share the cost when more than one policy covers a claim.

Level premium term, sometimes referred to as level premium level term, provides

a level face amount with level premiums during the policy term. If the policy is renewed after the term expires, the policy premiums will be based on the insured's attained age, or the insured's present age at the time the policy is renewed. In order to provide a level premium, the policy must have a premium that is on average higher in early policy years in order to offset the lower premium in the policy's later years.

Pure loss of income, or "income replacement contracts," pays the insured...

a portion of their earned income while disabled. Income replacement contracts DO NOT require the insured to endure a period of total disability before benefits are paid. These policies tend to be more affordable because the policy pays benefits for the percentage of income earnings lost. Example: Tom's disability causes him to lose 20% of his income earnings for a month. The pure loss of income disability policy will compensate Tom for this 20% loss of income.

Term insurance is effective for

a temporary period of time, as designated in the policy. Term policies only pay a death benefit if the insured dies during the policy term. Term policies strictly provide life insurance protection (a death benefit) and do not accrue cash value.

An agent guilty of committing fraud will not be permitted to transact insurance. In order to transact insurance again, the agent must obtain:

a waiver of written consent from their state insurance department.

A long-term care policy shall set forth a description of any limitations or conditions for eligibility, including any required number of days of confinement, in a separate paragraph of the policy and shall label the paragraph: Select one: a. "Limitations or Conditions on Eligibility for Benefits" b. "Provisions or Conditions on Liability for Benefits" c. "Restrictions or Conditions on Indemnity for Benefits" d. "Margins or Conditions on Indemnity for Benefits"

a. "Limitations or Conditions on Eligibility for Benefits" Individual LTC policies MUST contain 2 STATEMENTS about limitations 1. a renewability provision that appears on the first page of the policy. All riders/endorsements added to a long-term care policy after date of issue or at reinstatement or renewal shall require a signed acceptance by the insured. If a long-term care insurance policy contains any limitation with respect to pre-existing conditions, such limitation shall appear as a separate paragraph of the policy and shall be labeled "PRE-EXISTING CONDITIONS LIMITATION." 2. A long-term care policy shall set forth a description of any limitations or conditions for eligibility, including any required number of days of confinement, in a separate paragraph of the policy and shall label such paragraph "Limitations or Conditions on Eligibility for Benefits."

Any person who is in violation of the law regarding twisting will be fined not more than: Select one: a. $5,000 b. $10,000 c. $15,000 d. $20,000

a. $5,000

In calculating the life insurance net payment cost index for policies in Connecticut, the cash surrender value is set at: Select one: a. 0 b. $10,000 c. $50,000 d. $100,000

a. 0

How many hours of continuing education may be carried over from one biennium to the next? Select one: a. 0 hours b. 4 hours c. 8 hours d. 10 hours

a. 0 hours ZERO NADA

How much time is the right to examine period for an individual life insurance policy? Select one: a. 10 days b. 14 days c. 30 days d. 31 days

a. 10 days Every individual life insurance policy delivered or issued for delivery to any person in Connecticut must have printed on it or attached to it a notice that the policy may be returned by the applicant for cancellation by delivering or mailing the policy to the insurer or to the insurance agent through whom it was effected, at any time within 10 days after receipt of the policy by the applicant.

In the claims payment provisions in a health policy, the standard time for a company to deliver a claim form once it has been notified of a loss is: Select one: a. 15 days b. 20 days c. 45 days d. 60 days

a. 15 days The insurance company has 15 days to provide a claim form under the Uniform Claims Provision clause.

An insurer must file a notice of appointment within: Select one: a. 15 days b. 21 days c. 30 days d. 31 days

a. 15 days To appoint a producer, an insurer must file a notice of appointment within 15 days from the date the contract was executed.

Which of the following is the permitted compensation arrangement for agents' first year commission on LTC and Medigap policies? Select one: a. 200% of the renewal commission for the second year b. 400% of the renewal commission for the third year c. 100% of the renewal commission for the second year d. 200% of the renewal commission for the third year

a. 200% of the renewal commission for the second year

All sales involving replacement of a partnership policy must be reported to the Commissioner within how many days of the effective date of the newly issued policy? Select one: a. 30 days b. 60 days c. 90 days d. 120 days

a. 30 days Partnership Policy means any long-term care insurance policy that is tax-qualified long-term care issued for delivery to any resident of Connecticut which is designed to provide for necessary care or treatment of an injury, illness or loss of cognitive or functional capacity provided by a certified or licensed health care provider in a setting other than an acute care hospital, for no less than one year at issue after a reasonable elimination period. Report all sales involving replacement to the Commissioner within 30 days of the effective date of the newly issued policy/certificate.

In a long-term care policy, pre-existing conditions must be covered after: Select one: a. 6 months from the effective date of coverage b. 12 months from the effective date of coverage c. 18 months from the effective date of coverage d. 24 months from the effective date of coverage

a. 6 months from the effective date of coverage Many long-term care (LTC) policies do not cover pre-existing conditions which were present 6 months prior to the policy's effective date. This is the most restrictive definition of pre-existing conditions an insurer can use. 6 months after the effective date of coverage, all pre-existing conditions must be covered. The correct answer is: 6 months from the effective date of coverage

Each viatical settlement provider must file with the Commissioner on or before March 1 each year an annual statement containing: Select one: a. A breakdown of policies viaticated by insurer and policy type b. A comparison of policies viaticated compared to life insurance policies sold c. A synopsis of all applicants with results d. A list of all viators names

a. A breakdown of policies viaticated by insurer and policy type

A business may be the beneficiary on any of the following policies, EXCEPT: Select one: a. A group insurance policy of one of the employees b. A key man life insurance policy c. A policy used to fund a buy/sell agreement d. A policy used to fund an executive bonus plan

a. A group insurance policy of one of the employees

The first page of every long-term care policy must have: Select one: a. A notice to the buyer b. The insurer's name and address c. The general terms of the policy d. The premium due date and frequency

a. A notice to the buyer

Which of the following is not a correct statement about equity-indexed annuities? Select one: a. A securities license is required to sell EIAs. b. The principal and interest are guaranteed. c. Earnings above the guaranteed rate are linked to the stock market. d. Earnings are also tied to the insurer's overall investment performance.

a. A securities license is required to sell EIAs. A securities license is not currently required to sell equity-indexed annuities.

A disability policy containing which of the following provisions is the cheapest? Select one: a. Any occupation policy that has a 180-day elimination period b. Own occupation policy that has a 90-day elimination period c. Any occupation policy that has a 90-day elimination period d. Own occupation policy that has a 180-day elimination period

a. Any occupation policy that has a 180-day elimination period This one is the most restrictive (I have to be so disabled that I can't do ANY job, not just the job I happen to have at the time of application. I also have to wait the longest for benefits.)

When does the waiver of premium rider take effect? Select one: a. At the moment of the disability b. When the claim is filed c. After a 30 day waiting period d. After 60 days

a. At the moment of the disability The waiver of premium rider will waive premiums retroactively (if necessary) to when the disability occurred.

Which of the following unfair trade practices does NOT involve misrepresentation? Select one: a. Boycott b. Churning c. Twisting d. Defamation

a. Boycott

What Connecticut program provides limited assistance in the purchase of prescription drugs? Select one: a. ConnPACE b. ConnMAP c. HUSKY d. Connecticut Life and Health Insurance Guaranty Association

a. ConnPACE ConnPACE stands for the Connecticut Pharmaceutical Assistance Contract to the Elderly and Disabled. It is a state-funded program that provides limited assistance in the purchase of prescription drugs. This program is only available to individuals who are not eligible for Medicare. ConnPACE has an annual open enrollment period for any new applicants to the program from November 15 to December 31 of each year with eligibility beginning January 1.

Which of the following is not true regarding SIMPLE plans? Select one: a. Contributions are vested after 5 years. b. The employer can take a tax deduction for contributions. c. There is an annual maximum for salary deferral contributions. d. Contributions and interest earned are tax-deferred until withdrawn.

a. Contributions are vested after 5 years. (Not true) TRUE: Contributions are fully vested immediately.

What can the Commissioner impose in connection with services provided under the HUSKY Plan, Part B? Select one: a. Cost-sharing requirements b. A time-sharing prescriptive c. Profit-sharing schedule d. Profit-loss ratio

a. Cost-sharing requirements The Commissioner shall impose cost-sharing requirements, including the payment of a premium or copayment, in connection with services provided under the HUSKY Plan, Part B, to the extent permitted by federal law, and in accordance with the following limitations: Cost-sharing requirements may not exceed 5% of the family's gross annual income. The Commissioner may impose a premium requirement on families whose income exceeds 235% of the federal poverty level as a component of the family's cost-sharing responsibility, as long as the family's annual combined premiums and copayments do not exceed the maximum annual total cost-sharing requirement, and premium requirements may not exceed the sum of $30 per month per child, with a maximum premium of $50 per month per family. The Commissioner may not impose a premium requirement on families whose income exceeds 185% of the federal poverty level but does not exceed 235%of the federal poverty level.

In addition to the basic health services, an HMO may also offer which of the following services? Select one: a. Health education programs (quit smoking, prepare for childbirth, etc.) b. Spiritual counseling c. Naturopathic medicine d. Dental care

a. Health education programs (quit smoking, prepare for childbirth, etc.) Another service of an HMO is the continuing education programs to promote better health choices.

Karen was disfigured and will have the scars repaired on her face. At the same time, she wants to have a cosmetic face-lift. What coverage can she expect through her company group plan? Select one: a. Her plan will cover repairing the disfigurement due to the accident, but the facelift will not be covered. b. Since the face-lift is incidental to repairing the disfigurement, it will also be covered. c. Neither the disfigurement, not the face-lift will be covered, since cosmetic surgery is a standard exclusion. d. The insurance company will determine which procedure is the most expensive and pay for one only.

a. Her plan will cover repairing the disfigurement due to the accident, but the facelift will not be covered. Cosmetic surgery is a standard exclusion with the exception of repairing damage from an accident or birth defect. If the claim is presented as a combination repair and a voluntary cosmetic procedure, the repair will be covered and the cosmetic surgery will not.

Any refund for a Medicare supplement policy shall be paid directly to the applicant by the insurer: Select one: a. In a timely manner b. Within 3 days c. Within 5 days d. Within 7 days

a. In a timely manner Medicare supplement policies and certificates shall have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the applicant shall have the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason. Any refund made shall be paid directly to the applicant by the insurer in a timely manner.

What kind of policy pays $100 daily benefit for a hospital stay with no deductible? Select one: a. Indemnity plan b. Basic plan c. Major medical plan d. Reimbursement plan

a. Indemnity plan A plan that pays a FLAT AMOUNT without any schedule of benefits is an indemnity plan.

Health Maintenance Organizations are organized as: Select one: a. Individually chartered pre-paid service providers b. Admitted insurance companies allowed to provide health insurance c. Reimbursement plans for medical services d. An additional part of Medicare to provide more comprehensive services to seniors

a. Individually chartered pre-paid service providers A Health Maintenance Organization is organized as a pre-paid medical service plan.

Who has the right to assignment of beneficiaries in a group life insurance policy? Select one: a. Insured only b. Insured or company only c. Insured or insurer only d. Insured, company or insurer

a. Insured only Any person whose life is insured under any policy of group life insurance is permitted to make an assignment of all or any part of their incidents of ownership in such insurance, including, without limitation, any right to designate a beneficiary.

A limited payment life insurance policy is best suited for: Select one: a. Josh, a 25-year old successful entrepreneur with extra funds, who doesn't want to pay life insurance premiums when he retires. b. Kelly, a 40-year single waitress who wants the most insurance protection for the least amount of money. c. Megan and Tom, newlyweds who need a life insurance policy to cover the mortgage on their house. d. Berry, an 18-year old student with limited funds.

a. Josh, a 25-year old successful entrepreneur with extra funds, who doesn't want to pay life insurance premiums when he retires.

Field underwriting is primarily useful to: Select one: a. Make observations that could impact insurability b. Get to know the family c. Develop leads d. Correct errors or omissions on the application

a. Make observations that could impact insurability The primary value of the field underwriting, is that the agent has the opportunity to view the applicant in his/her surroundings, in person, and make observations regarding insurability and perhaps class of risk (i.e. is the applicant obese, does he/she have any obvious dangerous hobbies, does he/she smoke).

Making any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy is an example of: Select one: a. Misrepresentation b. Twisting c. Rebating d. Torqueing

a. Misrepresentation Making any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy is an example of misrepresentation.

What restrictions are permitted on the use of the proceeds payable under an accelerated benefits policy? Select one: a. None b. The proceeds can be used by the insured only c. The proceeds can only be used for medical needs d. The proceeds can only be used for debt payments

a. None

By providing return of premium, full benefits for a reduced benefit period, reduced benefits for the full benefit period, or another benefit that is acceptable, an insurer meets the requirement for: Select one: a. Nonforfeiture benefit b. Accelerated benefit c. Nondisclosure benefit d. Mandatory benefit

a. Nonforfeiture benefit No insurer shall offer for sale a long-term care insurance policy unless the insurer also offers the applicant the option to purchase a policy that provides a nonforfeiture benefit. An insurer shall meet this requirement by providing return of premium, full benefits for a reduced benefit period, reduced benefits for the full benefit period, or another benefit that is acceptable. A policy that provides a nonforfeiture benefit shall include a schedule of this benefit.

Which of the following is not one of the differences between permanent and term life insurance? Select one: a. Permanent life insurance policies are nonparticipating, whereas term life insurance policies are participating. b. Permanent life insurance provides death protection to the insured for the insured's entire life, whereas term life insurance is effective for a designated period of time. c. Permanent life insurance policies have cash value, whereas term life insurance policies do not accrue cash value. d. Permanent life insurance provides death protection and builds cash value, whereas term life insurance strictly provides death protection.

a. Permanent life insurance policies are nonparticipating, whereas term life insurance policies are participating. Participating and nonparticipating polices are not differences between permanent and term life insurance policies. Everything else is relevant.

Any person making within Connecticut directly or indirectly any contract of insurance on behalf of any insurance company which is not licensed to do business in Connecticut shall be: Select one: a. Personally liable to the insured b. Personally liable to the insurer c. Financially responsible to the Commissioner d. Considered a nonresident producer

a. Personally liable to the insured

Which of the following terms best describes conditions for which prior medical advice or treatment was received? Select one: a. Pre-existing conditions b. Probationary period c. Recurrent disability d. Benefit payment clause

a. Pre-existing conditions

All of the following statements are true regarding creditor group health insurance, EXCEPT: Select one: a. Premiums are typically paid by the lender. b. The lender is the policy's beneficiary. c. Creditor group health insurance protects lenders for losses resulting from disability or death of borrower. d. Creditor group health insurance provides specialized insurance for lenders to protect against nonpayment of a loan when a borrower becomes disabled or dies, and cannot repay the loan.

a. Premiums are typically paid by the lender.

Which of the following best describes the seven-pay test? Select one: a. Premiums paid over a seven-year period cannot exceed the total level annual premiums for a paid-up policy in seven years. b. Policy cash value cannot exceed cost basis. c. First seven premium payments cannot exceed cost basis over a ten-year period. d. First seven annuity premium payments cannot exceed cost basis over a ten-year period.

a. Premiums paid over a seven-year period cannot exceed the total level annual premiums for a paid-up policy in seven years.

Which of the following best describes creditable coverage? Select one: a. Prior health coverage b. Credit health insurance c. Insurance issued by a credit union d. None of the above

a. Prior health coverage

What does the Patient Protection and Affordable Care Act require before an employee's health insurance plan's coverage can be rescinded? Select one: a. Prior written notice must be given to the affected employee b. Prior written notice must be given to the Maryland Insurance Board c. Prior written notice must be given to the federal Patient Protection and Affordable Care Department d. All of the above

a. Prior written notice must be given to the affected employee

If the insurer cancels a health policy, the earned premium shall be computed: Select one: a. Pro rata b. Pro re nata c. Caveat emptor d. Caveat lector

a. Pro rata If the insurer cancels a health policy, the earned premium shall be computed pro rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation.

Which of the following is not one of the tax benefits of a qualified retirement plan? Select one: a. Proceeds of a qualified plan are not taxed. b. Employee contributions are made with pre-tax dollars. c. Interest earned is tax deferred. d. Employer contributions are not taxable income to the employee.

a. Proceeds of a qualified plan are not taxed. (This is NOT one of the benefits.) Employee contributions are made with pre-tax dollars. Employer contributions are not taxable income to the employee. Interest earned is tax deferred. Employees only pay taxes at the time of withdrawal of funds from the plan. These are all the tax benefits of a QUALIFIED RETIREMENT PLAN.

In Connecticut, cosmetic surgery is only covered in a health insurance policy when it involves: Select one: a. Reconstructive surgery for children b. Reconstructive surgery for adults c. Surgery for adults with appearance depression syndrome d. Complications of sexual reassignment surgery

a. Reconstructive surgery for children A policy may limit or exclude coverage by type of illness, accident, treatment or medical condition for cosmetic surgery, except when such medical service is incidental to or follows surgery resulting from trauma, infection or other diseases of the involved part, and reconstructive surgery because of congenital disease or anomaly of a covered dependent child which has resulted in a functional defect. The correct answer is: Reconstructive surgery for children

The rehabilitation benefit differs from partial disability in the following way: Select one: a. Rehabilitation requires a period of total disability and usually provides a benefit for a specified time to transition back to work. b. Partial disability will provide a graded benefit based on a time factor. c. Rehabilitation will be available for an unlimited time up to the policy maximum. d. All disability policies have a rehabilitation provision.

a. Rehabilitation requires a period of total disability and usually provides a benefit for a specified time to transition back to work. A rehabilitation benefit is specifically designed to help a disabled employee return to work. A disability benefit pays a reduced benefit based on employer pay for the partial work.

What type of health insurance policy cannot be renewed? Select one: a. Term policy b. Renewable at option of insurer c. Conditionally renewable d. Non-renewable

a. Term policy A term health policy cannot be renewed.

All of the following statements are true about the elimination period, EXCEPT: Select one: a. The elimination period is the time between the effective date of the policy and the date coverage begins. b. The elimination period is the period of time from the date of accident, illness or disability, until benefits are paid. c. Benefits are not paid during the elimination period. d. The elimination period is common in disability income and long-term care policies.

a. The elimination period is the time between the effective date of the policy and the date coverage begins. This is not true; the PROBATIONARY period is described above, but the elimination period is the period of time from the date of accident, illness or disability, until benefits are paid. Benefits are not paid during the elimination period. It also true that the elimination period is common in disability income and long-term care policies.

In Connecticut, an insurer is allowed to deny enrollment of a child under a group health plan of the child's parent in cases when: Select one: a. The father of the child has not acknowledged paternity b. The child does not reside with the parent or in the insurer's service area c. The child is not claimed as a dependent on the federal income tax return of the parent d. The child is receiving benefits under a state medical assistance plan required by the Social Security Act

a. The father of the child has not acknowledged paternity An insurer shall not deny enrollment of a child under the group health plan of the child's parent if: the child was born out of wedlock, provided the father of the child has acknowledged paternity; the child is not claimed as a dependent on the federal income tax return of the parent; the child does not reside with the parent or in the insurer's service area; or if the child is receiving, or is eligible for benefits under a state medical assistance plan required by the Social Security Act.

What options does the insurer have if an insured tries to have multiple policies with similar coverage, with the same insurer? Select one: a. The insurer can limit coverage to one policy. b. The insurer can refuse to issue coverage to the insured. c. The insurer can notify the Insurance Commissioner. d. All of the above

a. The insurer can limit coverage to one policy. If an insured has 2 or more policies with the same insurer, the insurer can limit the coverage to 1 policy, cancel the second policy and return premiums paid.

All insurance advertisements must include which of the following? Select one: a. The name of the insurer b. The address of the insurer c. The phone number for the Connecticut Insurance Department d. All of the above

a. The name of the insurer The name of the actual insurer shall be stated in all of its advertisements.

No person will aid in any way in the transaction in Connecticut of any insurance business with or by any insurance company not thus authorized, except to obtain insurance for: Select one: a. The person only b. The person and their spouse c. The person, their spouse and dependents d. The person, their spouse, dependents or business associates

a. The person only

Providers of life settlement contracts must provide written disclosures, such as the date by which the funds will be available to the owner and: Select one: a. The transmitter of the funds b. The keeper of the remuneration c. The remitter of the dividends d. The spreader of the distributions

a. The transmitter of the funds

Residual disability is: Select one: a. When the insured has a total disability, returns to work, but can only perform some of the duties they could perform prior to the disability b. A condition in a disability income policy that permits the insured to be automatically eligible for total disability income benefits regardless of their ability to work c. The inability of an individual to perform one or more work duties in their own occupation, or they cannot work full-time d. A time period specified in the policy during which the recurrence of a disabling condition is considered an extension of a prior disability

a. When the insured has a total disability, returns to work, but can only perform some of the duties they could perform prior to the disability

Preferred risks are individuals who are

above average in terms of physical condition and lifestyle and present a less than average risk to the insurer. These risks have lower premiums than standard risks. In life insurance, these are healthy non-smoking individuals with long life expectancies.

As field underwriters, agents help reduce the chance of ___________.

adverse selection, assure that the application is filled out completely and correctly, collect the initial premium and deliver the policy.

Accelerated Living Benefit Rider

allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness. Depending on the policy, life insurance premiums may be waived upon payment of the accelerated benefit. This accelerated benefit rider is intended to provide a terminally ill insured with necessary funds to pay medical expenses and nursing home costs during a terminal illness while the insured is living, and relieves financial burdens associated with terminal illness. Effect on Death Benefit The death benefit is the face amount reduced by the amount of accelerated benefit paid to the insured. Example: If Linda has a $100,000 life insurance policy and receives $40,000 accelerated benefits for her terminal illness and the insurer loses $200 of interest, then Linda's beneficiary will receive $59,800 in death benefits when she dies.

Elimination Period

amount of time that lapses after a disabling event before the insurance company begins to pay benefits. The Elimination Period is a type of deductible based on time, not dollars. Often confused with the probationary period, the elimination period is the period of time from which accident, illness, or disability begins, until benefits are paid. Benefits are not paid during the elimination period. Elimination Period = Time Deductible The elimination periods do not have to be consecutive. For each benefit that has an elimination or waiting period, the policy must state the terms of the period before the benefits become payable. Elimination periods are common in disability income and long-term care policies.

self-insured companies/ organizations use ____________________ to administer their plans.

an outside party! (TPAs, ASOs, or Administrators)

For us to do a contract for proposed insured Maria, she must either be the actual ___________ or provide _____________.

applicant ; written consent.

Investigative reports

are based on interviews with friends and neighbors, employers and coworkers, and other individuals who know the insured. Investigative reports cannot be made unless the insured is notified of the report in writing.

Inspection reports

are performed by a credit-reporting agency. Insurers must abide by the rules of the Fair Credit Reporting Act (FCRA).

Buy-sell agreements (also known as business continuation agreements) are used to

assure the ownership of the business is properly transferred upon the death or disability of an owner or partner.

A medical report is sometimes used for underwriting policies with higher face amounts. If the information in the medical section warrants further investigation into the applicant's medical conditions, the underwriter may need an __________________.

attending physician statement (APS). The attending physician statement is the report from the applicant's physician or other qualified medical examiner, such as a paramedic or nurse, who completes the applicant's medical examination as requested by the insurer. Once the medical report is completed, it is sent to the insurer for use in underwriting.

Standard risks are individuals in

average physical condition with average lifestyles and habits for people of their respective sex and age group. Standard risks are the average risks of an insurer.

The "low option deductible" for a comprehensive health care plan is how much per person? Select one: a. $100 b. $200 c. $300 d. $400

b. $200

What is the minimum care period offered in a Partnership Policy? Select one: a. 6 months b. 1 year c. 18 months d. 2 years

b. 1 year

The Medicare payroll tax is: Select one: a. 1.45% b. 2.90% c. 6.20% d. 12.40%

b. 2.90% (split 50/50 between employer and employee)

How many days of skilled nursing care will Medicare Part A provide? Select one: a. 20 days only b. 20 days in full with an additional 80 days requiring a co-pay c. 100 days in full if the patient shows enough improvement in his/her condition d. All days require a co-pay

b. 20 days in full with an additional 80 days requiring a co-pay

How many days of skilled nursing care will Medicare Part A provide? Select one: a. 20 days only b. 20 days in full with an additional 80 days requiring a co-pay c. 100 days in full if the patient shows enough improvement in his/her condition d. All days require a co-pay

b. 20 days in full with an additional 80 days requiring a co-pay If the patient has completed a qualifying hospital stay, the first 20 days of skilled nursing care are covered in full. Part A will provide up to an addition 80 days of care subject to a co-pay.

Connecticut insurance producers must complete at least how many hours of continuing education every licensing period? Select one: a. 16 hours b. 24 hours c. 30 hours d. 40 hours

b. 24 hours Producer licenses are valid for a two-year period. Producers must complete 24 hours of continuing education every two years to keep their licenses in effect and valid. At least three of those hours must relate to ethics and Connecticut law and regulations. Of the total, a minimum of six hours must be taken through course work applicable to the line of authority held. No credit hours may be carried over from one biennium to the next.

In Connecticut, the accelerated benefit can be what maximum percentage of the full life policy benefit? Select one: a. 20% b. 25% c. 33.33% d. 50%

b. 25% The company may set a minimum amount for the accelerated benefit, but in no case shall it be more than 25% of the face value of the policy. The accidental death benefit, if any, in the policy shall not be affected by the payment of the accelerated benefit.

What is the traditional probationary (waiting) period for coverage from a Medicare supplemental policy to be in effect? Select one: a. Immediately b. 30 days c. 60 days d. 90 days

b. 30 days

What is the typical partial disability benefit? Select one: a. 50% of insured's previous earnings b. 50% of the monthly indemnity for total disability. c. 75% of the monthly indemnity for total disability d. 100% of insured's previous earnings

b. 50% of the monthly indemnity for total disability. The partial disability indemnity is usually 50% of the monthly or weekly indemnity for total disability.

An insured, returning from a disability, is working part-time. If he qualifies for a partial disability provision, he will receive what percent of his pre-disability wage from disability benefits in addition to his part-time salary? Select one: a. 30% flat with no offsets b. 50%, but the total wage may not exceed his pre-disability wage c. 60% offset by Social Security d. 70% if the part time wage is less per hour than his pre-disability wage

b. 50%, but the total wage may not exceed his pre-disability wage

Standardized Medicare supplement policies must not exclude or limit benefits for losses incurred more than how many months from the effective date of coverage because it involved a pre-existing condition? Select one: a. 3 months b. 6 months c. 9 months d. 12 months

b. 6 months Standardized Medicare supplement policies must not exclude or limit benefits for losses incurred more than 6 months from the effective date of coverage because it involved a pre-existing condition.

How much time does someone have to transfer funds from one IRA to another without incurring a tax penalty? Select one: a. 30 days b. 60 days c. 90 days d. 120 days

b. 60 days

Tax-sheltered annuities (TSA) provide retirement income for employees who work for: Select one: a. The government b. A nonprofit organization c. A Fortune 500 company d. A small business.

b. A nonprofit organization

Because Sylvia paid the initial premium WHEN her policy was delivered, in order for the policy to be in effect, the agent is required to obtain: Select one: a. A binding receipt b. A statement of good health c. An inspection report d. All of the above

b. A statement of good health When the initial premiums is not paid until policy delivery, the agent NEEDS to obtain a statement of good health, signed by the insured, stating that the insured's health has not changed.

Short-term disability riders are called: Select one: a. Social insurance supplement riders b. Additional monthly benefit riders c. Impairment riders d. Hospital confinement riders

b. Additional monthly benefit riders

Short-term disability riders are called: Select one: a. Social insurance supplement riders b. Additional monthly benefit riders c. Impairment riders d. Hospital confinement riders

b. Additional monthly benefit riders The additional monthly benefit (AMB) rider provides benefits during the first 6 - 12 months of the claim.

Which of the following statements is not true about the tax liabilities of a group life policy? Select one: a. Premiums paid by the employer are deductible as a business expense. b. Benefits paid by installments are tax-free. c. Lump-sum proceeds are tax-free. d. The costs for the first $50,000 of group term life have no tax consequences for the employee.

b. Benefits paid by installments are tax-free.

Under the Uniform Provision Law all of the following provisions are mandatory for a health insurance contract, EXCEPT: Select one: a. Entire contract provision b. Change of Occupation provision c. Physical exam & autopsy provision d. Time limit on certain defenses provision

b. Change of Occupation provision The change of occupation provision is optional and may or may not be in a health insurance contract.

Inducing a policyholder to switch insurance companies without regard to bad consequences is: Select one: a. Boycott b. Churning c. Twisting d. Defamation

b. Churning

What Connecticut program ensures that seniors are not overcharged for Medicare? Select one: a. ConnPACE b. ConnMAP c. HUSKY d. Connecticut Life and Health Insurance Guaranty Association

b. ConnMAP ConnMAP stands for the Connecticut Medicare Assignment Program. It is administered by the State Department of Social Services and ensures that physicians and other Part B providers will not charge ConnMAP enrollees more than the reasonable and necessary rate established by Medicare. You are eligible for ConnMAP is you are enrolled in Medicare Part B, have been a resident of Connecticut for at least 6 months, and have an annual income under a certain threshold.

Which of the following is NOT a power of the Commissioner? Select one: a. Issuing subpoenas b. Creating insurance laws c. Examining books and records d. Conducting investigations and hearings

b. Creating insurance laws

Replacement is a transaction in which: Select one: a. Existing life insurance is upgraded to higher value b. Existing life insurance is being surrendered to a new insurer c. Existing life insurance is reissued by the insurer at the same value d. Existing life insurance is reinstated by the insurer at the same value

b. Existing life insurance is being surrendered to a new insurer

What annuity is characterized by flexible premium payment amounts and frequency, and an annuity period that begins 20 years after the annuity purchase date? Select one: a. SPDA b. FPDA c. SPIA d. Immediate or deferred annuity

b. FPDA

In what plan arrangement(s) can Consumer Driven Health Plans (CDHPs) be offered? Select one: a. FSA or HSA b. HRA or HSA c. HSA only d. HRA only

b. HRA or HSA

Which of the following is NOT an action that only the owner of an annuity can take? Select one: a. He/she can make withdrawals. b. He/she can make changes during the annuity period. c. He/she can change the beneficiary. d. He/she can surrender the annuity.

b. He/she can make changes during the annuity period. Can't do it! The only time that changes can be made to an annuity is during the accumulation period. Once it reaches the annuity period, it cannot be changed.

Which of the following is one of the insurer's duties in a life insurance policy replacement transaction? Select one: a. Initiating the application b. Informing personnel of replacement regulations c. Giving the applicant a Notice Regarding Replacement of Life Insurance d. Collecting a statement signed by the applicant that existing life insurance is being replaced

b. Informing personnel of replacement regulations The rest are duties of the producer.

Which of the following is NOT one of the producer's duties in a life insurance policy replacement transaction? Select one: a. Initiating the application b. Informing personnel of replacement regulations c. Giving the applicant a Notice Regarding Replacement of Life Insurance d. Collecting a statement signed by the applicant that existing life insurance is being replaced

b. Informing personnel of replacement regulations This is the INSURER's duty, not the producer's.

The private insurance companies that make coverage and payment decisions regarding Medicare services provided by hospitals are called: Select one: a. Carriers b. Intermediaries c. Both of the above d. Neither of the above

b. Intermediaries Intermediaries make decision about services provided by hospitals, as well as skilled nursing facilities, home health and hospice.

A policy written as non-cancellable means the insurance company will: Select one: a. Cancel the policy with written notice b. Not be able to cancel the policy, nor raise the premium c. Not be able to cancel the policy, but it may raise premiums on an entire class d. Cancel the policy and/or raise premiums after a specified period of time

b. Not be able to cancel the policy, nor raise the premium A non-cancellable policy also has a guaranteed premium.

Benefits for individual medical expense, LTC and Medigap policies are: Select one: a. Taxable. b. Not taxable. c. Only taxed if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. d. Only taxed if an individual's unreimbursed medical expenses do not exceed 10% of their adjusted gross income.

b. Not taxable. Benefits for individual medical expense, LTC and Medigap policies are received tax-free.

Individual Medicare supplement and LTC premiums are: Select one: a. Always tax-deductible b. Only tax-deductible if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income c. Only taxable if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income d. Never tax-deductible

b. Only tax-deductible if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income Premiums for Medigap and LTC policies may be deducted from taxable income if the individual's unreimbursed medical expenses exceed 10% of their adjusted gross income.

Which of the following definitions of total disability is most beneficial to the insured? Select one: a. Any occupation b. Own occupation c. Accidental means d. Not enough information provided

b. Own Occupation

The entire health insurance contract includes: Select one: a. Application only b. Policy with endorsements and attached papers only c. Application and policy with endorsements and attached papers d. Application, policy with endorsements and attached papers and Buyer's Guide

b. Policy with endorsements and attached papers only The policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance.

For life insurance policies that do not have an unconditional refund provision, when must the Buyer's Guide be delivered? Select one: a. Prior to the presentation b. Prior to accepting the applicant's initial premium c. Within 3 days after accepting the application d. Prior to or with the policy

b. Prior to accepting the applicant's initial premium The insurer shall provide to all prospective purchasers a Buyers Guide and a Policy Summary prior to accepting the applicant's initial premium, unless the policy for which application is made contains an unconditional refund provision of at least 10 days, in which case the Buyer's Guide and Policy Summary must be delivered WITH the policy or PRIOR TO DELIVERY of the policy. These requirements do not apply to policies with a death benefit that does not exceed $5,000.

For life insurance policies that do not have an unconditional refund provision, when must the Buyer's Guide be delivered? Select one: a. Prior to the presentation b. Prior to accepting the applicant's initial premium c. Within 3 days after accepting the application d. Prior to or with the policy

b. Prior to accepting the applicant's initial premium The insurer shall provide to all prospective purchasers a Buyers Guide and a Policy Summary prior to accepting the applicant's initial premium, unless the policy for which application is made contains an unconditional refund provision of at least 10 days.

All of the following are true regarding recurrent disability, EXCEPT: Select one: a. Recurrent disability occurs when the insured becomes disabled from the same or related event or condition that caused a prior disability. b. Recurrent disability means that the insured has a total disability and returns to work, but can only perform some of the duties they could perform prior to the disability. c. Disability income policies may consider a recurrent disability a new or existing claim, depending on the policy. d. Waiting periods for a recurrent disability must be noted in the policy.

b. Recurrent disability means that the insured has a total disability and returns to work, but can only perform some of the duties they could perform prior to the disability. It doesn't necessarily constitute total disability. The insured may also be unable to work at the time of the claim.

Which of the following is not an illegal form of discrimination? Select one: a. Refusal to insure or to limit the amount of coverage offered to an individual solely because of the individual's sex, marital status, race, religion, or national origin b. Refusal to insure or to limit the amount of coverage offered to an individual because of documented chemical dependency issues c. Refusal to insure solely because another insurer has refused to write a policy or has cancelled an existing policy on that person d. Termination or modification to coverage or refuse to renew coverage solely because the applicant or insured is mentally or physically impaired

b. Refusal to insure or to limit the amount of coverage offered to an individual because of documented chemical dependency issues

Long-term care policies contain all of the following provisions, EXCEPT: Select one: a. 30-day free look period b. Restricted coverage to skilled care only c. Shopper's guide provided to applicants prior to completing the policy application d. Policy summary provided if a long-term care policy is purchased with a life insurance policy

b. Restricted coverage to skilled care only

What must be provided to all prospective long-term care applicants? Select one: a. Buyer's guide b. Shopper's guide c. Terms of service d. Proof of purchase

b. Shopper's guide A long-term care insurance shopper's guide in the format developed by the National Association of Insurance Commissioners or developed or approved by the Commissioner must be provided to all prospective applicants. For agent solicitations, the agent shall deliver the shopper's guide prior to the presentation of an application. For direct response solicitations, the shopper's guide shall be presented in conjunction with any application.

No advertisement of a benefit for which payment is conditional upon confinement in a hospital shall use any of the following phrases, EXCEPT: Select one: a. Tax free b. Skilled care c. Extra income d. Extra pay

b. Skilled care

Medicare Part B offers benefits for all of the following, EXCEPT: Select one: a. Psychiatric care b. Skilled nursing facilities c. Physician's services d. Health care aids

b. Skilled nursing facilities Skilled nursing facilities are covered on a limited basis under Medicare Part A. Part B will cover physician services, diagnostic, X-ray and lab and durable medical equipment.

Which of the following pays monthly income for food, shelter and clothing needs to individuals with limited incomes, are disabled or blind, or are age 65 and older? Select one: a. Social Security b. Supplemental Security Income Benefits c. Medigap d. Medicare

b. Supplemental Security Income Benefits

What can the Commissioner do to an insurance producer violating any replacement regulation? Select one: a. Issue a cease and desist order b. Suspend or revoke the license c. Order a fine d. Order jail time

b. Suspend or revoke the license

Who will determine whether a life insurance advertisement has the capacity or tendency to mislead or deceive? Select one: a. The insurers b. The Commissioner c. The NAIC d. The FCC

b. The Commissioner

Which of the following best describes option 1 under a universal life policy? Select one: a. The death benefit is the policy face amount or policy cash value, but not both. b. The death benefit is a level benefit c. The death benefit is only the face amount. d. The death benefit is only the cash value.

b. The death benefit is a level benefit

Which of the following is not an assignment whereby someone would transfer legal rights as the policyowner of a life contract? Select one: a. Collateral, partial, conditional assignment b. Total, complete, unconditional assignment c. Beneficiaries' assignment d. Absolute, voluntary, complete assignment

b. Total, complete, unconditional assignment A total, complete, unconditional assignment does not exist in the insurance world.

Variable annuities are characterized by: Select one: a. A variable rate of growth and guaranteed payments b. Variable interest rates and variable benefits c. Guaranteed benefits and guaranteed interest rate d. No options on where the funds are invested

b. Variable interest rates and variable benefits

Which of the following statements regarding policy loans from personal life insurance policies is not true? Select one: a. Loans may be taken against personal life insurance policies that build cash value. b. When a personal life insurance policy endows, the amount of any unpaid loan plus interest is not deducted from the policy proceeds. c. Policy loans are not taxable. d. Interest on policy loans will be charged on loans that remain unpaid.

b. When a personal life insurance policy endows, the amount of any unpaid loan plus interest is not deducted from the policy proceeds. It IS deducted from the proceeds. The insurer will charge interest on loans that have not been repaid. Loans are repaid or recovered upon policy surrender or maturity.

The disclosure authorization form used by an insurance institution for life insurance policies issued in Connecticut may NOT be: Select one: a. Dated b. Written in unclear language c. Specific as to the nature of the information to be disclosed d. Specific as to the types of persons authorized to disclose information

b. Written in unclear language

With decreasing term insurance, as the mortgage is paid off, the amount of the term coverage decreases to match the

balance of the mortgage. Decreasing term insurance is not suitable for clients interested in purchasing life insurance to fund an investment.

Premium amounts are based on Morbidity which is the rate people are expected to _____.

become disabled from accident or sickness in a year. Morbidity data helps insurers estimate how many people will become disabled, and the duration of disabilities.

Cross-purchase plans are

business continuation agreements intended for business partnerships with two or three partners.

Mentioning the Connecticut Life and Health Insurance Guaranty Association in multiple advertisements without knowing that it's illegal may result in a maximum penalty of how much? Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000

c. $50,000

A policy summary must illustrate life insurance cost indexes for which 2 specific years? Select one: a. 5 and 10 b. 10 and 15 c. 10 and 20 d. 10 and 25

c. 10 and 20 Life insurance cost indexes for 10 and 20 years, but in no case beyond the premium-paying period.

In Connecticut, in cases where a husband and wife are in the same group insurance plan, the benefits provided to a spouse may not be in excess of what percentage of the charge for a covered expense? Select one: a. 50% b. 75% c. 100% d. 200%

c. 100% Every health insurance policy issued under a group insurance plan and by an insurance company, hospital or medical service corporation, health care center or fraternal benefit society, delivered, issued for delivery or renewed in Connecticut shall allow the spouse of any employee participating in such or any other group insurance plan offered by the same employer to be covered as an employee in addition to being covered as a dependent of such participating employee, except that benefits provided under such combined coverage of the employee as an employee and as a dependent shall not be in excess of 100% of the charge for the covered expense or service. This law shall apply only where a husband and wife are employed by the same employer and by reason of their employment are both participating in a group insurance plan.

The appropriate rider allows premium payments to be waived in the event of disability. What is the normal waiting period for premiums to be waived? Select one: a. 30 days b. 60 days c. 3 or 6 months d. 1 year

c. 3 or 6 months There is usually a waiting period of 3 or 6 months once the policy owner becomes disabled before the first premium will be waived.

An insurance company must notify the Insurance Department of the cancellation or nonrenewal of an appointment within: Select one: a. 15 days b. 21 days c. 30 days d. 31 days

c. 30 days Any insurance company which cancels or nonrenews an appointment of any agent or any agency shall notify the Insurance Department, the agent and the agency, in writing, within 30 days of any such cancellation or nonrenewal.

The information in an application for life, health or disability insurance can be disclosed to insurance institutions for up to: Select one: a. 18 months b. 24 months c. 30 months d. 36 months

c. 30 months

If a conditional receipt for a lapsed health insurance policy has been accepted, an insurer has how many days to reinstate the policy? Select one: a. 21 days b. 30 days c. 45 days d. 60 days

c. 45 days If any renewal premium is not paid within the time granted the insured for payment, a subsequent acceptance of premium by the insurer or by any agent duly authorized by the insurer to accept such premium, without requiring in connection therewith an application for reinstatement, shall reinstate the policy; provided, if the insurer or such agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the policy shall be reinstated upon approval of such application by the insurer or, lacking such approval, upon the 45th day following the date of such conditional receipt unless the insurer has previously notified the insured, in writing, of its disapproval of such application.

A policy summary must illustrate the premium and benefit patterns for the years for which life insurance cost indexes are displayed and at least one age from: Select one: a. 50 to 60 b. 50 to 65 c. 60 to 65 d. 60 to 70

c. 60 to 65

What is the maximum elimination period for a disability income protection plan that provides benefits for up to 1 year? Select one: a. 30 days b. 60 days c. 90 days d. 120 days

c. 90 days

A single mother wants to be sure her children are financially secure in the event of her death. She cannot obligate herself to a high premium at this time. Her youngest child is age 5, and she wants protection until her children are out of college. Gail would most likely want to consider: Select one: a. An annual renewable term plan b. A guaranteed premium whole life c. A 20-year level premium term plan d. A fully funded universal life plan

c. A 20-year level premium term plan A 20-year level term plan will most likely be the best choice for Gail's needs.

Which of the following is illegal in Connecticut? Select one: a. A health provider issuing a replacement policy for a comprehensive health insurance plan to an employer more than 60 days before the final date of the previous policy b. A health provider issuing a policy to an employer that combines a comprehensive health insurance plan for its employees together with a life insurance plan c. A health provider issuing a policy providing limited coverage to an employer as a replacement for a comprehensive health insurance plan for its employees d. An outline of coverage must be delivered with a group specified disease policy

c. A health provider issuing a policy providing limited coverage to an employer as a replacement for a comprehensive health insurance plan for its employees

To prevent major illness devastation, a self-employed person might consider: Select one: a. A flexible spending account with no other insurance. b. A cancer plan with a health savings account c. A high deductible health plan in conjunction with a health savings account d. A hospital indemnity plan in conjunction with a flexible spending account

c. A high deductible health plan in conjunction with a health savings account

To prevent major illness devastation, a self-employed person might consider: Select one: a. A flexible spending account with no other insurance. b. A cancer plan with a health savings account c. A high deductible health plan in conjunction with a health savings account d. A hospital indemnity plan in conjunction with a flexible spending account

c. A high deductible health plan in conjunction with a health savings account A self-employed person will be well served with a health savings account and a high deductible health plan.

What plan would likely meet the needs of 2 partners who want to create a buy/sell agreement and an inexpensive and simple funding plan? Select one: a. An individual whole life policies that each purchase with their private funds b. A second to die plan which is less expensive c. A joint life plan, which will provide the survivor money to buy out the deceased partner's heirs. d. They can just pay the survivors heirs out of company earnings later.

c. A joint life plan, which will provide the survivor money to buy out the deceased partner's heirs.

If Naomi wishes to change the beneficiary on her life policy and does not need the consent of the beneficiary, the beneficiary is most likely: Select one: a. An estate b. A charity c. A revocable beneficiary d. A minor

c. A revocable beneficiary A revocable beneficiary can be changed without notification or consent.

What benefits are payable under a life insurance policy sold in Connecticut during the lifetime of the insured upon the occurrence of a qualifying event? Select one: a. Life benefits b. Death benefits c. Accelerated benefits d. Viatical benefits

c. Accelerated benefits

What feature would allow someone with terminal cancer to get money from their life insurance? Select one: a. Disability income rider b. Accidental death rider c. Accelerated death benefit d. Long term care rider

c. Accelerated death benefit

An advertisement with statistical information relating to any insurer or policy must: Select one: a. Partially reflect all of the relevant facts b. Somewhat reflect all of the relevant facts c. Accurately reflect all of the relevant facts d. Not mention relevant facts

c. Accurately reflect all of the relevant facts An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use irrelevant facts and shall not be used unless it accurately reflects all of the relevant facts. Such an advertisement shall not imply that such statistics are derived from the policy advertised unless such is the fact, and when applicable to other policies or plans shall specifically so state. The source of any statistics used in an advertisement shall be identified in the advertisement.

To be eligible for PACE, an individual must be: Select one: a. Age 50 or above and require nursing home care b. Age 60 or above, live in a PACE service area, and require home health care c. Age 55 or above, live in a PACE service area, and state-certified as requiring nursing home care d. Age 40 or above and disabled

c. Age 55 or above, live in a PACE service area, and state-certified as requiring nursing home care

All the following exclusions are permitted in a long-term care insurance policy, EXCEPT: Select one: a. Self-inflicted injuries b. Drug addiction c. Alzheimer's disease d. Participation in a felony

c. Alzheimer's disease

Which of the following is true regarding taxation of medical expense plans? Select one: a. Benefits are only taxable for individual policies. b. Benefits are only taxable for group policies. c. Benefits are not taxed. d. Benefits are taxable as ordinary income.

c. Benefits from a medical expense plan are not taxed.

In Connecticut, who must a licensee inform of a change in address? Select one: a. Their insurer b. Governor c. Commissioner d. Attorney General

c. Commissioner

The definition of "one period of confinement" as it relates to long-term care policies issued in Connecticut is: Select one: a. A length of confinement less than 30 days b. A length of confinement less than 60 days c. Consecutive days of confinement d. A period covering all causes within a certain period of time of confinement

c. Consecutive days of confinement With respect to long-term care policies issued in Connecticut, "one period of confinement" is defined as meaning consecutive days of confinement: it shall be deemed to include successive periods of confinement which are due to the same or related cause and are not separate by at least 90 days during which the insured is not confined for either skilled nursing care, custodial, intermediate care, or home and community-based care.

If life insurance death benefits are received in one lump-sum, what are the tax consequences? Select one: a. Death benefits received in a lump-sum are taxable. b. Interest only is taxable. c. Death benefits received in a lump-sum are not taxable. d. None of the above

c. Death benefits received in a lump-sum are not taxable. The death benefit from a life insurance policy is tax-free if received in a lump-sum.

No person may submit the annual report in such a manner as would identify any viator except with the express written consent of such viator or the viator's: Select one: a. Delegate b. Designee c. Estate or representative d. Mentor or spokesperson

c. Estate or representative

Which of the following nonforfeiture options permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? Select one: a. Reduced paid-up insurance b. Cash surrender value c. Extended term d. None of the above

c. Extended term The extended term option permits the policyowner to use the policy's cash values to buy paid-up term insurance.

Which of the following is not a settlement option for a life policy? Select one: a. Interest only option b. Life income option c. Extended term option d. Fixed amount option

c. Extended term option Extended term insurance is a nonforfeiture option which may be included with insurance to extend the coverage for a limited period of time upon the failure of a policy-holder to pay the premiums. So its NOT a "settlement option."

All of the following types of policies will NOT be subject to coordination of benefits, EXCEPT: Select one: a. Hospital indemnity policies b. Medicare Supplement policies c. Group Policies d. Individual Health policies

c. Group Policies Group policies generally have specific wording to limit duplication of benefits, which is referred to coordination of benefits.

Which of the following IS a requirement for a limited policy? Select one: a. Be in large type b. Be read to the insured c. Have THIS IS A LIMITED POLICY on the first page d. Have a signed statement acknowledging the limitations of the coverage, by the insured

c. Have THIS IS A LIMITED POLICY on the first page All states require that limited policies be labeled as such with THIS IS A LIMITED POLICY on the first page of the policy.

What is described by: "No insurer shall offer for sale a long-term care policy unless the insurer also offers the applicant the option to purchase a policy that provides for meaningful periodic benefit level increases to account for increases in the cost of long-term care services?" Select one: a. Replacement b. Right to return c. Inflation protection d. Non-forfeiture benefits

c. Inflation protection

Fraternals typically sell what type of insurance? Select one: a. Property insurance b. Accident and health insurance only c. Life, accident and health insurance d. Liability insurance

c. Life, accident and health insurance

No examination or prelicensing education is required of an applicant for a: Select one: a. Variable life producer license b. Life only producer license c. Limited lines producer license d. Resident producer license

c. Limited lines producer license

Which of the following is considered a reimbursement contract? Select one: a. Life insurance contract b. Disability income contract c. Major medical contract d. Accidental Death and Dismemberment contract

c. Major medical contract?

Which dividend option may offset some or all of the benefit reduction caused by loans from a participating whole life plan? Select one: a. Paid up additions b. Accumulate at interest c. One-year term option d. Reduction of his loan

c. One-year term option The one-year term option will purchase up to the amount of the cash value annually.

Jeanine needs braces. What type of dental care will provide the dental care Jeanine needs? Select one: a. Endodontics b. Prosthodontics c. Orthodontics d. Periodontics

c. Orthodontics

All of the following are true statements regarding business overhead expense coverage, EXCEPT: Select one: a. Overhead expense coverage includes benefits for rent and utilities b. Overhead expense coverage keeps the business functioning after the owner becomes disabled c. Overhead expense coverage pays the owner's salary d. Overhead expense coverage pays employees' salaries

c. Overhead expense coverage pays the owner's salary Silly!

A group plan's underwriting varies from individual plan underwriting in all of the following ways, EXCEPT: Select one: a. Claims for the employees of a large company will generally determine the rates for that group. b. Underwriting for groups is generally more liberal than for individual contracts. c. Participants in a group receive individual policies as evidence of coverage. d. Participant in larger plans generally do not have to answer health questions at enrollment.

c. Participants in a group receive individual policies as evidence of coverage. FALSE. They get certificates of insurance, but it is a single GROUP policy.

The Commissioner will issue a temporary insurance producer license for a maximum period of 180 days without requiring the licensee to: Select one: a. Establish residency in the state b. Receive a commission c. Pass an examination d. Make a sale

c. Pass an examination

Ron has inherited a non-qualified annuity from his father. The annuity has never been annuitized. What are the tax consequences for Ron? Select one: a. Ron has no tax liability since it was part of his father's estate. b. Ron can avoid tax by taking a monthly income. c. Ron will be subject to tax on any gains in the contract if he surrenders the contract. d. Ron can take advantage of the 5 year rule and avoid any tax consequences.

c. Ron will be subject to tax on any gains in the contract if he surrenders the contract. If he makes a complete surrender all gains are subject to ordinary income tax, but not penalties apply. The 5 year rule will spread out the tax liability, but it will not eliminate it.

"Determine the guaranteed cash surrender value, if any, available at the end of the 10th and 20th policy years." is the first step in the calculation of which index for life insurance policies issued in Connecticut? Select one: a. Industry index b. Stock market index c. Surrender cost index d. Consumer price index

c. Surrender cost index

Who adopts regulations that establish all necessary requirements for the provision of informed consent concerning AIDS and HIV infection? Select one: a. The insurers b. The state legislature c. The Commissioner d. The federal government

c. The Commissioner The Insurance Commissioner shall adopt regulations which establish all necessary requirements for the provision of informed consent. Such regulations shall include: requirements regarding sufficient notice at the time of application that the insured will be tested for HIV infection, and an explanation of AIDS and HIV infection.

Which of the following is not a characteristic of a credit life policy? Select one: a. A credit life policy is often added to the installment loan payments. b. Credit life can never be written for an amount greater than the debt. c. The debtor is the owner of the policy and pays the premium d. If the coverage exceeds the loan balance when the insured dies, the balance is paid to the estate.

c. The debtor is the owner of the policy and pays the premium. (Not true.) What IS characteristic, is that the On a credit life policy, the CREDITOR is the owner and the DEBTOR pays the premiums.

Which of the following is not true about HSAs? Select one: a. An individual must be enrolled in a high-deductible health plan. b. Funds are not subject to income tax when deposited. c. The funds do not roll over to the next year. d. The funds can be used to pay for qualified medical expenses without tax liability or penalty.

c. The funds do not roll over to the next year. FALSE! They can!

All of the following statements are true regarding the impairment rider in disability income policies, EXCEPT: Select one: a. The impairment rider is used when the insured has existing medical conditions. b. The impairment rider excludes coverage for the particular existing medical condition. c. The impairment rider drops off when the pre-existing condition exclusion period ends. d. The impairment rider allows insureds to obtain coverage in cases where they would otherwise be denied because of their health conditions.

c. The impairment rider drops off when the pre-existing condition exclusion period ends. This is not true.

Which of the following is not a consideration in replacing a health policy? Select one: a. Pre-existing conditions b. New waiting periods c. The location of the insurer d. Coverage and benefits

c. The location of the insurer Producers must take care that the replacement of an existing policy is for the insured's benefit. The location of the insurer is not an issue.

Which of the following is not a reason that the face amount of a life insurance policy may be subject to tax? Select one: a. The deceased transferred ownership of the policy within 3 years prior to death. b. The policy's ownership has been transferred to a third party. c. The policy proceeds are paid out in a lump-sum. d. The designated beneficiary is the deceased's estate.

c. The policy proceeds are paid out in a lump-sum.

Which of the following statements is not true about a revocable beneficiary on a life insurance policy? Select one: a. The policyowner can assign a trust as a revocable beneficiary. b. The policyowner can change the beneficiary without written consent of the beneficiary. c. The policyowner cannot change the beneficiary without their knowledge. d. The policyowner can assign a minor as a revocable beneficiary.

c. The policyowner cannot change the beneficiary without their knowledge. You gotta tell 'em!

All of the following are true about the probationary clause on a health policy, EXCEPT: Select one: a. Accidents are covered immediately b. Sicknesses are not covered until the probationary period has expired c. The probationary clause is one of the 12 mandatory clauses d. The probationary clause will be found in the insuring clause

c. The probationary clause is one of the 12 mandatory clauses The probationary clause is actually NOT one of the 12 mandatory clauses. It is usually added to limit or modify a contract to protect against pre-existing conditions.

Max and Janet were killed simultaneously. Max had a life policy with Janet as the primary beneficiary. How will the proceeds from the policy be disbursed? Select one: a. The proceeds were disbursed to their children. b. The proceeds were disbursed to Max's estate. c. The proceeds were disbursed to the contingent beneficiary. d. The proceeds went back to the insurance company.

c. The proceeds were disbursed to the contingent beneficiary. When the insured and the primary beneficiary die at the same time, the proceeds are paid to the contingent beneficiary.

In the state of CT, in what case is abortion covered by employer group insurance plans? Select one: a. Rape b. Incest c. To save the life of the mother d. All of the above

c. To save the life of the mother Pregnancy Discrimination Act Any health insurance provided by an employer must cover expenses for pregnancy-related conditions on the same basis as costs for other medical conditions. An employer need not provide health insurance for expenses arising from abortion, except where the life of the mother is endangered. Pregnancy-related expenses should be reimbursed exactly as those incurred for other medical conditions, whether payment is on a fixed basis or a percentage of reasonable-and-customary-charge basis.

All of the statements are true about universal life policies, EXCEPT: Select one: a. The actual cost of the insurance is based on annually renewable term life insurance. b. The policyowner can increase or decrease the death benefit during the policy term. c. Universal life policies are only subject to the interest rates stated in the contract. d. The interest earned by the cash accounts has a guaranteed minimum.

c. Universal life policies are only subject to the interest rates stated in the contract. A universal life policy is subject to 2 different interest rates: the current annual rate, which varies with current market conditions, and the rate stated in the contract.

A domestic company issuing what kind of contracts must establish one or more separate accounts? Select one: a. Standard b. Modified c. Variable d. Government

c. Variable If they're selling variable products the will need at least one additional account.

Which of the following best describes the Medicare Part D "coverage gap?" Select one: a. After the $415 deductible has been met, the coverage gap begins b. When Medicare Part D pays all prescription drug costs c. When the individual pays a percentage of all generic prescription drug costs d. When catastrophic coverage begins, the individual only pays a small copayment for each prescription drug

c. When the individual pays 58% of all generic prescription drug costs Once the combined spending between the individual and the plan reaches $3,310, the individual is in their coverage gap known as the doughnut hole, where the individual pays 58% of generic prescription drug costs until the individual has spent $4,850 out-of-pocket over the course of the year.

To be eligible for disability benefits, a person must be under the ____________________ at the time the claim is made.

care of a physician. Some policies merely require "regular care and attendance," while other policies require the care to be "appropriate," given the disability. It is important to know which type of care the policy requires, as the insurer may reject a claim if the policy calls for "appropriate" care and the insurer finds that the care was not sufficiently appropriate for the disability.

In most cases, the application is attached to, and becomes part of, the _____________.

contract. If the application is attached to the contract and the insurer discovers intentional misstatements, it can be used as a legal document. Agents should do their best to review the applicant's answers to questions on the application to avoid delays in underwriting from inaccuracies.

Franchise insurance provides

coverage for small groups that are not large enough to apply for group coverage. Each individual applicant undergoes individual underwriting.

Funding for Social Security and Medicare is collected from FICA payroll taxes. The program is pay-as-you-go. In other words, payroll taxes collected from a worker today are not put into a special savings account for that worker; instead, Social Security payroll taxes go to ____________________________________________.

covered workers currently drawing Social Security benefits

POS Point-of-service Plans

cross between HMO and PPO; HMO features are retained (utilization controls, capitation), PPO features (open plan option) are available at the point of service, have lost popularity due to high out-of-pocket costs Subscribers simply pay more for the privilege of having control of choosing a health care provider.

A stock purchase plan is a

cross-purchase plan used by corporations to buy the stock from deceased shareholders. Each shareholder agrees to buy a portion of the deceased shareholder's stock at an agreed price. Each shareholder purchases, pays the premiums and is a beneficiary on a life insurance policy on each of the other shareholders.

Which of the following is not characteristic of hospital indemnity coverages? Select one: a. The coverage pays a stated amount per day the insured is confined to the hospital. b. Premiums are low. c. Benefits can be used for non-medical purposes. d. The benefit amount is based on the insured's income earnings.

d. In reality, the amount of hospital income benefits is NOT based on the insured's income earnings.

What words must be included in the policy title in any life insurance advertisement? Select one: a. "Contract" b. "Policy" c. "Benefits" d. "Life insurance"

d. "Life insurance"

Medicare supplement policies or certificates shall not provide for the payment of benefits based on standards described as: Select one: a. "Common and habitual," "rational and traditional" b. "Ordinary and traditional," "logical and habitual" c. "Typical and expected," "viable and customary" d. "Usual and customary," "reasonable and customary"

d. "Usual and customary," "reasonable and customary" Medicare supplement policies or certificates shall not provide for the payment of benefits based on standards described as "usual and customary," "reasonable and customary" or words of similar import.

Connecticut Life insurance regulations involving the Buyers Guide, Policy Summary and unconditional refund provision do not apply to policies with a death benefit that does not exceed: Select one: a. $1,000 b. $2,000 c. $2,500 d. $5,000

d. $5,000

Unmarried children may be covered under the Connecticut Comprehensive Health Care Plan through what age? Select one: a. 19 b. 21 c. 23 d. 26

d. 26

John is totally disabled and has applied for Social Security disability benefits. How long must John wait to be eligible to receive full Medicare benefits? Select one: a. 6 months b. 12 months c. 24 months d. 29 months

d. 29 months A disabled covered worker, regardless of age, is eligible to receive full Medicare benefits after the waiting period AND two years of receiving Social Security disability benefits after 29 months.

In Connecticut, how much time does a covered employee who is terminated from a group life policy have to convert to an individual life insurance policy? Select one: a. 15 days b. 21 days c. 30 days d. 31 days

d. 31 days

Within how many days must Samantha roll over the funds from her IRA to avoid the 20% withholding tax penalty? Select one: a. 10 days b. 31 days c. 45 days d. 60 days

d. 60 days

An underwriter will consider which of the following conditions in making their decision to approve an application for insurance? Select one: a. A condition that is contracted after the first premium is paid b. A condition that occurs after the policy is issued c. A minor childhood sickness d. A condition that occurs prior to making an application for insurance

d. A condition that occurs prior to making an application for insurance

A contract that heavily restricts one party while leaving the other free (as some standard form printed contracts) and implies inequality in bargaining power is: Select one: a. A unilateral contract b. A conditional contract c. An aleatory contract d. A contract of adhesion

d. A contract of adhesion A health insurance contract is a good example of a contract of adhesion.

Recurrent disability is: Select one: a. When the insured has a total disability, returns to work, but can only perform some of the duties they could perform prior to the disability b. A condition in a disability income policy that permits the insured to be automatically eligible for total disability income benefits regardless of their ability to work c. The inability of an individual to perform one or more work duties in their own occupation, or they cannot work full-time d. A time period specified in the policy during which the recurrence of a disabling condition is considered an extension of a prior disability

d. A time period specified in the policy during which the recurrence of a disabling condition is considered an extension of a prior disability

A temporary insurance producer will be subject to any limitations seen fit by the Commissioner, including possibly having a licensed producer: Select one: a. Receive 20% of the producer's commissions b. Functioning as a guarantor c. Transacting controlled business d. Acting as a sponsor

d. Acting as a sponsor A temporary insurance producer will be subject to any limitations seen fit by the Commissioner, including possibly having a licensed producer acting as a sponsor.

An individual who is not eligible for premium-free Medicare Part A coverage may apply for coverage during which of the following enrollment periods? Select one: a. Initial enrollment period b. General enrollment period c. Special enrollment period d. All of the above

d. All of the above

In Connecticut, an insurance institution may not disclose any personal or privileged information concerning an individual collected or received in connection with an insurance transaction unless the disclosure is: Select one: a. Made with the written authorization of the individual b. Made for the purpose of conducting actuarial or research studies c. Made to a government authority to protect the interests of the insurance institution d. All of the above

d. All of the above

No insurance institution or agent may prepare or request an investigative consumer report pertaining to an individual in connection with an insurance transaction unless the insurance institution or agent informs the individual if it involves: Select one: a. Reinstatement b. Policy renewal c. Application for insurance d. All of the above

d. All of the above

Relating to accelerated benefits, "qualifying event" means which of the following? Select one: a. A medical condition which would, in the absence of extensive or extraordinary medical treatment, result in death in a relatively short period of time b. A medically determinable condition suffered by the insured which can be expected to result in death in a relatively short period of time, such as 12 months and may include, but is not limited to, coronary artery disease, myocardial infarction, and stroke c. A medically determinable condition suffered by the insured which has caused the insured to be confined for at least 6 months in an institution which provides necessary care or treatment of an injury, illness or loss of functional capacity. d. All of the above

d. All of the above

Replacement is not always the best option for the insured because: Select one: a. A new policy could required the applicant to prove insurability b. A new incontestable period will start with the issuance of the new policy. c. The premiums for the new policy could be higher. d. All of the above

d. All of the above

When soliciting insurance policies to seniors, insurance professionals must take care to: Select one: a. Provide a full explanation of policy benefits b. Fully explain any overlapping coverage c. Have the prospective insured sign a statement acknowledging that the required information and disclosures were provided d. All of the above

d. All of the above

Which of the following is true about the Social Security rider in a disability income policy? Select one: a. The rider may or may not continue when Social Security benefits start. b. An all or nothing rider pays the insured a benefit if Social Security pays nothing. c. An offset rider pays the insured a benefit that is reduced by any benefit paid by Social Security. d. All of the above

d. All of the above

Which of the following is available under the Medicare Advantage program? Select one: a. Private fee-for-service plans b. Managed care plans c. Preferred Provider plans d. All of the above

d. All of the above Medicare Private Fee-For-Service plans are offered by private companies and allow beneficiaries to receive care from any provider approved by Medicare that is willing to accept the payment schedule of the plan.

Because it is less expensive, term insurance has which of the following drawbacks? Select one: a. It has no living benefits b. It is an expensive tool if looked at for the long term. c. The nature of the policy could leave the insured with no life insurance protection when he/she needs it the most. d. All of the above.

d. All of the above.

Amy purchases a health insurance policy. The renewability feature is specified as "guaranteed renewable until age 65." All of the following statements are false, EXCEPT: Select one: a. Amy's policy may be terminated at any time b. Amy's policy will continue in force until she is 65 years of age and her premiums will not be increased c. Amy's policy may be canceled if she develops certain medical conditions d. Amy's premiums may be increased on a class basis, and her policy may be terminated when she reaches the age of 65

d. Amy's premiums may be increased on a class basis, and her policy may be terminated when she reaches the age of 65

How often may the insurer examine the person of the insured? Select one: a. Once only b. No more than once every 2 months c. No more than once a year d. As often as it wants

d. As often as it wants (During a claim). The insurer at its own expense shall have the right and opportunity to examine the person of the insured when and as often as it may reasonably require during the pendency of a claim hereunder and to make an autopsy in case of death where it is not forbidden by law.

Who may administer oaths, examine and cross-examine witnesses and receive oral and documentary evidence, and has the power to subpoena witnesses, compel their attendance and require the production of books, papers, records, correspondence or other documents which are relevant to an insurance inquiry? Select one: a. Governor of Connecticut b. Lieutenant Governor of Connecticut c. Attorney General of Connecticut d. Commissioner

d. COMMISSIONER

Of the following renewal provisions for health insurance, which is least favorable to the insured? Select one: a. Noncancelable b. Conditionally renewable c. Guaranteed renewable d. Cancelable

d. Cancelable

Using a marketing method that fails to disclose in a conspicuous manner that the purpose of the marketing is to solicit Medicare supplement insurance is: Select one: a. Twisting b. Rebating c. High pressure tactics d. Cold lead advertising

d. Cold lead advertising Cold lead advertising, which is defined as making use of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company, is a prohibited practice.

If a Medicare supplement policy is terminated for an insured, what happens to coverage of a spouse? Select one: a. Coverage is always terminated. b. Coverage may be reinstated after an appeal. c. Coverage may be terminated at the insurer's discretion. d. Coverage may not be terminated.

d. Coverage may not be terminated.

Any of the following transactions will be subject to federal income tax consequences in a modified endowment contract (MEC), EXCEPT: Select one: a. Policy loans b. Policy withdrawals c. Partial withdrawals d. Death proceeds

d. Death proceeds

Which of the following is NOT considered a limited policy? Select one: a. Dental coverage b. Accident coverage c. Vision coverage d. Disability income coverage

d. Disability income coverage

Controlled business is usually written on all the following, EXCEPT: Select one: a. The licensee b. Spouse c. Employer d. Friends

d. Friends

What is the rule in Connecticut concerning use of genetic information? Select one: a. Genetic information indicating a predisposition to a disease is deemed a pre-existing condition b. Genetic information is treated as a condition in the absence of a diagnosis of the condition c. Genetic information can be used to refuse to insure an individual d. Genetic information can never be used for insurance purposes

d. Genetic information can never be used for insurance purposes

A long-term care policy must be issued that in addition to nursing home benefits provides for one pool of benefit dollars when: Select one: a. Hospital services are chosen b. Domestic services are chosen c. Private services are chosen d. Home and community-based services are chosen

d. Home and community-based services are chosen Issue a policy that provides for one pool of benefit dollars when home and community-based services are chosen in addition to nursing home benefits.

All of the following are true about credit life insurance, EXCEPT: Select one: a. Credit life can be written on an individual or group basis. b. The creditor owns the policy, and the debtor pays the premiums. c. Credit life is often decreasing term insurance. d. If the debtor dies, the creditor gets all of the benefits of the policy.

d. If the debtor dies, the creditor gets all of the benefits of the policy. If when the debtor dies the coverage exceeds the loan amount, the creditor is paid the balance due on the loan, the remainder goes to the debtor's estate.

All of the following statements regarding Medicare Part C are false, EXCEPT: Select one: a. Individuals must enroll in Medicare Part D separately b. Eligible individuals for Medicare Part C must be age 65 to 75 c. Individuals may not enroll during the general enrollment period d. Individuals must have Medicare Parts A and B to enroll in Medicare Part C

d. Individuals must have Medicare Parts A and B to enroll in Medicare Part C An individual can enroll in Medicare Part C if the individual has Medicare Parts A and B, lives in the plan's service area, and doesn't have ESRD.

In what provision does this statement appear: "Benefits are subject to all the provisions, conditions and exclusions of the policy?" Select one: a. Entire contract clause b. Consideration clause c. Owner's rights d. Insuring clause

d. Insuring clause The insuring clause details the terms of the policy and what the insurance company will do in return for the premiums paid. It emphasizes the conditions and exclusions that are present in the policy.

Who provides funding for the Connecticut Life and Health Insurance Guaranty Association? Select one: a. Federal government b. State government c. Reinsurers d. Member companies

d. Member companies Members of the association are subject to assessment to provide funds, and the association is authorized to assist the Commissioner in the prescribed manner in the detection and prevention of insurer impairments. All insurance companies licensed to write life and health insurance are required to be members of the association.

Arturo buys an individual disability income policy. What are the tax consequences? Select one: a. Premiums are not taxed. b. Premiums and benefits are tax-free. c. Benefits are taxable. d. Premiums are paid with after-tax dollars.

d. Premiums are paid with after-tax dollars. Premiums for individual disability income policies are not tax-deductible, BUT benefits are received tax-free. :)

Medicare Part B covers all of the following, EXCEPT: Select one: a. Outpatient care b. Physicians' fees c. Preventive care d. Private duty nursing

d. Private duty nursing

Tooth replacement with artificial structures, dental implants, bridges and dentures are: Select one: a. Restorative dental treatments b. Oral surgery procedures c. Periodontics d. Prosthodontics

d. Prosthodontics

What policy feature in major medical policies allows the maximum lifetime benefit to be restored to its original amount after a large portion of the benefits have been used? Select one: a. Out-of-pocket limit b. Stop-loss c. Deductible d. Restoration of benefits

d. Restoration of benefits

All of the following are true regarding the period certain life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. The principal reduces to zero by the end of the period. c. The amount of each installment is based on the length of the period, the amount of the policy proceeds and the interest rate. d. Shorter payment periods result in lower payments.

d. Shorter payment periods result in lower payments.

Variable products (variable annuities & variable insurance) are regulated by: Select one: a. State only b. SEC only c. FINRA only d. State, SEC, and FINRA

d. State, SEC, and FINRA

Which of the following is true regarding cancellation of an accident and health policy by an insurer in Connecticut? Select one: a. The insurer may cancel a policy at any time without notice to the insured. b. The insurer is not required to return the unearned portion of premiums paid. c. The cancellation is effective only if notice is given over the phone to the policyholder. d. The cancellation will be without prejudice to any claim originating prior to the effective date of cancellation.

d. The cancellation will be without prejudice to any claim originating prior to the effective date of cancellation. The insurer may cancel this policy at any time by written notice delivered to the insured and to any dependents who were listed on the application and any subsequent revisions thereto, or mailed to their last address as shown by the records of the insurer, stating when, not less than five days thereafter, such cancellation shall be effective; and after the policy has been continued beyond its original term the insured may cancel this policy at any time by written notice delivered or mailed to the insurer, effective upon receipt or on such later date as may be specified in such notice. In the event of cancellation, the insurer will return promptly the unearned portion of any premium paid. If the insured cancels, the earned premium shall be computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro-rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation.

Eric, an executive assistant, has a disability income policy with the change of occupation provision. Eric quits his office job and becomes a construction worker. What would happen to Eric's policy if he becomes disabled after the job change? Select one: a. The insurance company would void the policy. b. The insurance company would refund the premiums paid and void the policy. c. The insurance company would pay the full amount of disability income benefits. d. The insurance company would pay the amount of disability income benefits that the premium purchased would have covered for Eric's more hazardous occupation.

d. The insurance company would pay the amount of disability income benefits that the premium purchased would have covered for Eric's more hazardous occupation.

All of the following are true regarding key person disability income insurance, EXCEPT: Select one: a. Key person insurance pays periodic income benefits to businesses when a key employee is disabled. b. The amount of the disability income benefit is based on the key person's economic value to the business. c. Benefits may be paid monthly or in a lump-sum. d. The key person owns the policy, but the business pays the premiums and receives the benefits.

d. The key person owns the policy, but the business pays the premiums and receives the benefits. Key person disability income pays periodic income benefits to businesses when a key employee is disabled. The amount of the disability income benefit is based on the key person's economic value to the business, the loss of income that would occur from reduced sales and hiring a replacement employee while the key person is disabled. Benefits may be paid as monthly periodic benefits or in a lump-sum. The BUSINESS owns the policy, pays the premiums and receives the benefits.

Which of the following is not a characteristic of a group life policy? Select one: a. States generally require an employer to have at least 10 people covered to qualify as a group. b. Administration of the plan, including making premium payments, is the responsibility of the policyholder. c. Covered group members receive a certificate of insurance. d. The premiums are based on the age of the group as a whole.

d. The premiums are based on the age of the group as a whole. This is false. Group life policy premiums are based on the EXPERIENCE of the groups as whole, NOT the age.

Which of the following happens after a guaranteed renewable individual health insurance policy insured's death? Select one: a. The policy ends after the death benefits. b. The insurer may, at their discretion, continue the policy for the spouse. c. The insurer must continue the policy for the spouse, but may charge a higher premium. d. The spouse of the insured becomes the insured.

d. The spouse of the insured becomes the insured. A "noncancellable", "guaranteed renewable", or "noncancellable and guaranteed renewable" policy will not provide termination of coverage of the spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than non-payment of premium. In case of insured's death, the spouse of the insured shall become the insured.

All of the following are true about market value adjusted annuities, EXCEPT: Select one: a. Values are guaranteed for a specific period of time. b. Surrender fees apply if the annuity is surrendered prior to annuitization. c. Adjustments made upon surrender are based on market value. d. This is not a fixed contract.

d. This is not a fixed contract. (No true.) A market value adjusted annuity IS a fixed contract.

What is the purpose of Part C Medicare? Select one: a. To extend services to low-income individuals that might otherwise be unavailable b. To encourage individuals eligible for Medicare coverage to enroll in the Medicare program alone c. To eliminate or sharply reduce the traditional fee-for-service Medicare program d. To encourage Medicare beneficiaries to choose private health care plans as alternatives to the traditional fee-for service Medicare program

d. To encourage Medicare beneficiaries to choose private health care plans as alternatives to the traditional fee-for service Medicare program The main purpose of Medicare Part C is to reduce the financial strain on Medicare funds by providing access to a variety of new health options to beneficiaries and thus incentivizing beneficiaries to join private health care plans as an alternative to the fee-for-service Medicare program.

Misrepresenting pertinent facts or insurance policy provisions relating to coverage is considered to be a/an: Select one: a. Rebating b. Defamation c. A federal crime d. Unfair claim settlement practice

d. Unfair claim settlement practice

A life settlement contract is also called a: Select one: a. Residual settlement b. Preferred settlement c. Special settlement d. Viatical settlement

d. Viatical settlement

When must an Outline of Coverage for a group specified disease policy be delivered in Connecticut? Select one: a. At the initial presentation b. On acceptance of the initial premium c. Within 3 days of acceptance of the initial premium d. With the certificate

d. With the certificate

Conversion Option Insurers of group life policies must include a conversion option permitting the member to convert group life coverage to an individual policy upon the insured's...

employment termination, removal of a class of insureds, or when the master contract is terminated.

The Employee Retirement Income Security Act (ERISA) was instituted to _____________________.

enact minimum standards for pension plans and employee benefit plans. ERISA assures that retirement plan participants and their beneficiaries receive financial information disclosures about the plan and establishes standards for fiduciaries.

Indeterminate premium policies have premiums that

fluctuate between the current rate and maximum rate, as stated in the policy. The fluctuating premiums account for the insurer's actual mortality expense and investment experience. Premiums are typically lower in the early policy years.

The buyer's guide provides _____________.

general information about the types of life insurance policies available, in language that can be understood by the average person.

A new kind of policy is called the return of premium (ROP) term policy. ROP term policy premiums are

generally higher than a conventional term policy. The longer the term, the lower the premium. Premiums are returned to the insured if no death benefit has been paid and are not taxable.

Life insurance illustrations must differentiate between

guaranteed amounts and nonguaranteed amounts. Illustrations must also be approved by the insurer, to which the agent cannot make any changes.

The cash value in a permanent life insurance policy is a nonforfeiture value, which means the policyowner is

guaranteed and fully entitled to it.

Medicare provides

health insurance coverage for individuals over the age of 65.

TRICARE provides

health insurance coverage to active duty and retired members of the uniformed services and their dependents. TRICARE replaced CHAMPUS, the Civilian Health and Medical Program of the Uniformed Services. There are three types of TRICARE plans available: Prime, Extra, and Standard. Prime is the least costly and is organized like an HMO. Extra allows enrollees to receive medical care through a PPO arrangement. Standard allows enrollees to receive medical care from any medical provider, but is more expensive.

Industrial Life encompasses

home service insurance. Home service life insurance is issued in very small face amounts, such as $1,000 to $5,000. The premiums are paid weekly or monthly.

BlueCross provides _________ ___________ and BlueShield provides _________ ___________.

hospital service; doctor's service

Social Security benefits are based on ________.

how long a covered worker has worked throughout their life.

Increasing term insurance provides an

increasing face amount with level premiums. The increase occurs at certain intervals over the policy period. Increasing term insurance is not as common as other types of term insurance.

Interim term coverage provides

instantaneous coverage and is intended for people who plan on purchasing permanent life insurance coverage within a year. Interim term is frequently offered to automatically convert to permanent coverage at a specified date in the future. The premium for interim term is based on the insured's age upon application. The premium for permanent coverage is based on the insured's attained age upon conversion to permanent protection.

A person eligible for Social Security refers to______________ status (fully insured or currently insured).

insurability; A person who is fully insured is entitled to full retirement and survivor benefits. A currently insured person is only entitled to partial Social Security benefits.

Ambiguities in a Contract of Adhesion If the insurance contract not clear, the courts will rule in favor of the

insured because the insurer wrote the contract, to which the insured adheres. Insurers strive to use plain language in the contract to prevent the need for interpretation by the courts.

The two most important underwriting factors in disability income policies are the __________________, and the _____________________.

insured's occupation; insured's earned income. What do they do? How much do they make?

If the Contract is not clear, the courts side with the...

insured.

Cliff vesting

is when an employee becomes fully vested at a specified time rather than becoming partially vested in increasing amounts over an extended period of time.

The group's ability to pay premiums and renew coverage impacts policy issuance - called persistency. In the case of group employer plans, employers are required to pay at least some portion of the premiums; therefore, the group policies are likely to be _____________.

kept in force.

Contract law is based on legal contracts, while tort law deals with...

legal liability for civil wrongs such as negligence.

Group size matters to insurance companies because larger groups provide better _______________.

loss predictions.

Group insurance premiums are in many cases lower than those that can be obtained on individual policies because of the _________.

lower cost of effectuating the policy - recall that group contracts are underwritten collectively, not individually.

Applicants for a group policies usually don't have to do a _______________.

medical exam, unlike some individual plans.

For groups of 50 or more, insurers may not require enrollees' ________ _________ .

medical information Certificates of coverage are guaranteed issue for eligible employees and are not conditional on individual underwriting or pre-existing conditions. Guaranteed issue is available at the time of hire or during annual open enrollment. No eligible individual may be denied coverage, and the determination of benefits must be the same for all covered individuals.

Group life insurance is written for

members of a group, such as: An employer-employee group, Association, Union or Creditor-debtor group. Coverage is provided to the members of the group under one master contract. The group is underwritten as a whole, not on each individual member.

Distributions must begin by April 1 in the year after the plan participant reaches the age of 70½ or a ________________ penalty is assessed on the difference between the amount withdrawn and the required benefit amount. This applies to qualified plans and IRAs, except Roth IRAs.

nondeductible 50%

The Medical Information Bureau is a

nonprofit trade organization that maintains medical information about individuals that is used by life and health insurers.

As a general rule, premiums for life insurance policies are __________________ and proceeds from life insurance policies are _____________ if received in a lump sum. If proceeds are received in installments, a portion of the proceeds will contain interest, which is ________________.

not tax-deductible; tax-free taxable

Nonqualified plans are used just as frequently as qualified plans, despite the fact that they do not have the tax advantages of qualified plans. Nonqualified plans permit employers to ________________.

offer retirement plans only to their key employees.

Unilateral Contract

only the insurer makes a legally enforceable promise

Vesting Rules: The (ERISA) Employee Retirement Income Security Act imposes certain requirements on qualified plans. ERISA has a set of vesting rules for how participants achieve ownership of contributions made by employers. The longer an employee works for an employer, the greater the ________________ the employee has over the employer's share of contributions, resulting in the employee eventually having 100% ownership of the employer's contributions after a certain number of years. Participants' contributions are _______________ and cannot be forfeited.

percentage of ownership; 100% vested immediately

Substandard risks are termed extra risks or rated risks because they

pose a higher risk to the insurer than standard risks. This rating may be due to the applicant's: Physical condition, Disease history, Hazardous occupation, Dangerous hobbies or Habits. A stunt pilot or a chain smoker would be considered substandard risks. Substandard risks pay higher premiums because their life expectancy is shorter. Also an insurer might issue the policy with exclusion.

The premium payment mode is the frequency that ________.

premium payments are made. Some life insurance policies allow policyholders to pay one large single premium payment. This greatly reduces the costs of administering the policy since the insurer only needs to process one payment. Life insurers base rates on premiums paid annually. If premiums are paid more frequently, the insurer incurs an additional loading expense because the interest is based on only a partial payment rather than a full year, and the increased administrative costs of processing multiple premium payments. More frequent premium payments result in higher premiums. Regardless, insurers accept premium payments annually, semi-annually, quarterly, monthly and weekly.

Residual disability benefits pay the insured a disability income benefit equal to either: The difference between their______________ earnings and their earnings prior to the disability, OR ____% of the total disability benefit.

present ; 50%

Disability income benefits are paid to a covered worker in the amount of the _________ after a ________-month waiting period.

primary insurance amount (PIA) ; 5-month waiting period

Health insurance is provided by

private commercial carriers and the government. Health insurance provided by the government is also referred to as social insurance and includes programs such as Medicare, Medicaid, and TRICARE.

Risk in insurance means...

probability of financial loss.

disability income insurance

provides PAYMENTS to replace income when an insured person is unable to work. Benefits are valued - meaning that benefits are a stated amount - based on a percentage of the insured's lost income. Disability income insurance only covers the insured.

If the applicant changes to a more hazardous occupation, the insurance company will...

reduce the benefits proportionately, but the premium will stay the same.

Market Conduct

refers to the marketing practices of insurers and agents that involve interaction with insureds, claimants, or consumers. AKA, Doin' it right. Just be ethical. A Market Conduct Examination is a non-financial examination conducted by a state's insurance department to investigate an insurer's methods and practices of conducting insurance business.

Renewable term insurance allows the policyowner to

renew the term policy after the designated term expires, without having to prove insurability. The renewal premium will be based on the insured's attained age, so the premium will be higher. Because of this, renewable term insurance is sometimes said to have "step-rate premiums". Typically, renewable term policies have an age limit to which the term policy can be renewed, such as 75 or 85. This is stated in the policy.

If the applicant changes to a less hazardous occupation, the insurance company will...

return excess unearned premium.

The policy summary provides _________________.

specific information about the policy purchased, such as the premium and benefits.

The NAIC model provisions provide

standardization for all individual health insurance policy provisions and identify the rights of the insurer and policyowner. All states have adopted the NAIC model laws.

Medicaid is a

state and federally funded medical assistance program for financially disadvantaged individuals. Medicaid, or Title XIX, is a welfare program funded by state and federal dollars for people who have limited incomes and resources to cover the cost of health care. Medicaid is not insurance. It is a welfare program. Each state operates its own Medicaid program. The states must comply with federal regulations and guidelines. People that qualify for both Medicaid and Medicare are referred to as dual-eligible. Medicaid provides coverage for medical care and services that Medicare only partially covers, including nursing home and home health care.

Insurance is primarily regulated on a ___________ basis with minimal _______________.

state-by-state ; federal oversight

When it comes to policy surrenders, any cash value greater than the amount of premiums paid in is _____________.

subject to tax. Example: Tom surrenders his whole life insurance policy with total cash value $200,000; however, he has only paid $110,000 of premiums. The additional $90,000 is taxable.

When a contract owner partially or entirely surrenders a deferred annuity prior to annuitization, the insurer will impose a _____________.

surrender charge. The purpose of the charge is to account for lost investment value the insurer relied upon. You get punished more the earlier you take the cash out. The surrender charge is greatest during the early contract years and in many cases decreases to zero after a certain number of years, such as in the 10th or 15th year. Some annuities have a free withdrawal feature that allows the contract owner to withdraw a certain amount each year (typically 10%) without incurring a surrender charge. Example: Rick purchases an annuity contract with a $30,000 purchase payment. The contract has a schedule of surrender charges beginning with 8% in the first year and declining by 1% each year thereafter. Rick is allowed to withdraw 10% of the contract value each year - free of surrender charges. In the first year, Rick decides to withdraw $10,000, or one-third of his contract value of $30,000 (assuming that his contract value has not changed because of investment performance). In this case, Rick could withdraw $3,000 (10% of contract value) free of surrender charges, but he would pay a surrender charge of 8%, or $560, on the other $7,000 withdrawn. In addition to the surrender charge, there is a 10% tax penalty for surrendering a deferred annuity before the age of 59 ½, as well as ordinary income tax that must be paid on the interest earned. Fortunately, Rick is 62 years old and will not incur the early withdrawal tax penalty.

Qualified Plans have...

tax-advantages

Generally, beneficiaries receive life insurance proceeds _________ if received in a lump sum; however, proceeds from life insurance policies that result from a transfer of value, or were sold to another party, may be subject to ___________.

tax-free; taxation

Dividends from life insurance policies are considered a return of overcharged premiums and are therefore NOT considered not____________, because premiums are paid with after-tax dollars. However, interest earned on dividends is ____________.

taxable; taxable income.

Exposure

the condition of being prone to loss because of surroundings or the environment, e.g., living with a smoker, or driving in a car. Hazard is distinguished from exposure as being something that elevates the chance of a loss occurring; whereas, exposure is the ever-present uncertainty concerning loss.

Paid-Up Additions

the dividend is used to purchase a small amount of paid-up whole life insurance Long Explanation: The paid-up additions option allows the policyowner to use the dividend as a single premium to purchase an additional amount of whole life coverage. The amount of coverage that can be purchased is based on the insured's attained age when the paid-up addition is purchased. A new policy is not issued with paid-up additions. Instead, the paid-up addition coverage is added onto the policy's face amount. Insurers usually require that the type of coverage purchased with paid-up additions is the same type as the original policy. If the policyowner does not select a dividend option, the insurer will automatically use the paid-up additions option. Insurers automatically use the Paid-up Addition if no dividend option is selected. Unlike the one-year term option, paid-up additions do not expire - they are added onto the policy's face amount. Unlike the accumulation at interest option, the dividend used to purchase the paid-up additions contributes to the policy's cash value.

Utmost good faith

the expectation that all parties to the contract have acted in good faith, do not commit fraud, conceal or misrepresent facts. All relevant information must be exchanged between parties.

Term policies that increase premiums upon renewal are called step-rate because

the initial premium literally steps up to a higher amount each time the policy is renewed. Term policies that are renewable or convertible also require a higher premium upon these events.

The policy is delivered when _________>

the insurer approves the application and issues the policy for delivery. Delivery can take place electronically, by mail, or in person. If a conditional receipt was not issued, the insurer will declare the policy effective date.

Constructive delivery occurs when _____________>

the insurer hands over control of the policy to another person. Constructive delivery occurs when the insurer mails the policy to the agent or other policyholder representative for delivery to the insured. In these cases, a legal delivery has occurred. The initial premium must be paid for the policy to be delivered. In other words, constructive delivery occurs when the insurance company sends the policy to the agent or other representative of the policyholder and all premiums due are paid.

Personal delivery occurs when __________.

the insurer requires personal delivery of the policy by the agent in order to obtain a statement of good health from the insured. In this case, legal delivery does not occur until the agent personally delivers the policy to the insured. ***Possession of the policy by the applicant does not indicate delivery. Sometimes the insurer issues a policy to the applicant to look over. The initial premium has not yet been paid and the applicant wishes to review the coverage prior to acceptance by paying the initial premium. In such cases, coverage will not take effect until the inspection receipt has been collected from the applicant.

The less frequently premiums are made,

the lower they will be. More frequent premium payments incur additional administrative costs; on top of that, the insurer loses earnings since it does not have the premium for the entire year. Paying annual premiums is the least expensive premium payment mode.

The interest-adjusted net cost method uses...

the time value of money to compare policy costs. Interest is applied to policy premiums and dividends to account for the time value of money. There are two versions of this method: Surrender cost index and Net payment cost index. These indices compare the cost of insurance per $1,000 of coverage, taking into account depreciation of the dollar. Surrender Cost Index: The surrender cost index measures the cost of an insurance policy by projecting the total amount of cash value in a policy (sum of dividends and cash accrued) and deducting the total cost of premiums after a certain number of years. This method provides a net cost of the policy over a certain number of years by averaging the cost per $1,000 of coverage if a policy was surrendered at a specified time in the future. Net Payment Cost Index: The primary difference between the surrender cost and net payment cost methods is the cash value component. The net payment cost index excludes the cash value and only predicts the average annual premium cost.

If eligible individuals do not enroll during the eligibility period, then they will be required to ___________.

undergo a medical exam, which allows the insurer to select insureds on an individual basis, instead of on a group basis, subjecting individuals to more stringent underwriting requirements. In this way, insurers can prevent adverse selection. If the group does not use the eligibility period, then the open enrollment period is used.

Declined risks are

uninsurable. These individuals are too risky for an insurer, and are declined coverage.

The life income settlement option

uses an annuity to pay the policy proceeds. The beneficiary is provided with income that cannot be outlived: income is guaranteed for the beneficiary's entire life. The amount of each payment depends on: The beneficiary's life expectancy (age and gender), The amount of the policy proceeds, The interest rate, and Any payout guarantees.

The agent must provide the buyer's guide to the applicant when:

when the policy is delivered.

Permanent life insurance policies are

whole life policies that are effective for the entire life of the insured or up to the age of 100. Permanent life insurance policies have cash value.

Decreasing Term is used with...

with a mortgage.

Disability income policies can provide either occupational or nonoccupational coverage. Occupational policies pay disability income benefits regardless of whether the disability resulted from a _________________ or not. Nonoccupational policies only pay benefits if the disability resulted ______________________________ and the insured is eligible for Workers' Compensation benefits.

work-related incident ; outside of work or is not work-related

Constant flow of members joining and leaving a group is desirable for insurers, since __________________.

younger members pose a lower risk than older members.

There are many different types of insurance available to prospective insureds. These include:

Life and health insurance, Annuities, Property and casualty insurance, Credit insurance, and Variable insurance.

Times that insurers should provide notice to applicants/insureds

- Insurers must provide privacy policy information to individuals when the policy is delivered (at the latest) and annually. When a policy is renewed, notice must be provided by the date of renewal. - For policy reinstatements, the insurer must provide notice to the applicant/insured when the reinstatement request is made. - For changes to policy benefits, the insurer must provide the insured with a notice when the policy change request is made. - For a third party interview regarding an applicant, the insurer must provide the applicant with notice upon collection of information. - For an applicant interview, the insurer must provide the applicant with notice when the policy is delivered.

Unlike stock or mutual insurers, noncommercial organizations are nonprofit entities offering strictly...

...health insurance coverage.

Brokers always represent the...

...insured, not the insurer.

Agents always represent the...

...insurer, not the insured.

It is fairly common for mutual insurers to start out as stock insurers to gain the necessary funds before becoming mutual insurers. Transformation of a stock insurer into a mutual insurer is termed...

...mutualization, and the reverse is termed demutualization. One thing that mutual insurers share in common with stock insurers is a board of directors. Policyholders vote on who will serve on the board of directors.

Traditionally, stock insurers have been called nonparticipating insurers because...

...policyholders do not participate in the profits of the insurer, and thus do not receive dividends.

Service providers, or noncommercial organizations, are not technically "insurers" and do not sell insurance. They are better described as...

...service organizations that provide prepaid health plans for medical, surgical, and hospital expenses. Service providers sell medical services to members, who are termed subscribers. The insured is not reimbursed for the medical services received. Instead, the service organization pays benefits directly to the health care providers the subscribers' use.

Deductible

A deductible is the amount the insured must pay before the insurer will pay for the claim. For example, if an insured has a $500 deductible, but incurs $3,000 worth of loss, the insured will be required to pay $500 out-of-pocket before the insurer will cover the remaining $2,500. Deductibles apply to health insurance and are used to reduce premium costs and prevent abuse of a policy by unnecessary claims.

Hazard

A hazard is anything that increases the chance of a loss occurring from a particular peril. Hazards are conditions such as icy roads, improperly stored toxic waste, and driving while intoxicated. Hazard is distinguished from exposure as being something that elevates the chance of a loss occurring; whereas, exposure is the ever-present uncertainty concerning loss.

Government Insurance

After private insurers, the second main group of insurers is government insurers. Government insurance is also known as social insurance. The purpose of social insurance is to provide protection against fundamental risks by redistributing income to help people who cannot afford to pay the cost of incurring such losses themselves. Government insurance also provides insurance protection for catastrophic risks that private insurers will not cover.

A Fiduciary

Agents are required to uphold a fiduciary trust with respect to their applicants and insureds. This means that agents must handle the premiums collected from applicants and insureds in a position of financial trust. A fiduciary is a relationship of trust, in which the fiduciary handles money for another person.

The most familiar of the service insurers is...

BlueCross BlueShield. BlueCross health plans are intended for hospital costs. BlueShield health plans are for medical and surgical costs.

Coinsurance

Coinsurance is a cost-sharing mechanism between the insurer and the insured, and applies only to medical insurance. For a certain range of coverage, the insurer agrees to pay a large percentage of the expenses, and the insured is responsible for paying the remainder. Each policy has its unique coinsurance percentage; however, typical coinsurance is 80/20, in which case the insurer is responsible for paying 80% and the insured is responsible for paying 20%.

Controlled Business

Coverage written on a producer's or agent's own life or health and on the lives or health of individuals who are relatives or business associates of the producer is called controlled business. Typically, an agent writing controlled business must be writing at least half of his or her business to the general public or from other non-controlled sources. < 50%

Express Authority

Express Authority Express authority is the explicit authority granted to the agent by the principal as written in the agency contract.

The government intervened in the insurance industry with the SEC and the FTC. Describe these interventions:

FTC Intervention In the 1950s The Federal Trade Commission (FTC) wanted to control health insurance advertising and sales literature. However, in 1958 the Supreme Court asserted that the McCarran-Ferguson Act prohibits supervision of the insurance industry by a federal agency. Since then the FTC has tried to control the insurance industry, but has been unsuccessful. SEC Intervention In the 1950s the issue arose of how variable annuities would be regulated: by states or as securities products through the Securities and Exchange Commission. The Supreme Court ruled that variable products (variable life and annuities) are securities and would be regulated as such.

Define the Classifications of Risk

Financial - As the name implies, financial risks deal strictly with the potential for monetary loss. Insurance deals with financial risks. Fundamental - Fundamental risks involve an entire population or group of people, and include risks that everyone may be susceptible to, such as natural disasters, war or unemployment. Because fundamental risks are not the fault of individuals, society is held to deal with them. Most often, the government provides insurance for fundamental risks, such as national flood insurance. Speculative - Speculative risks present a potential for loss or gain and are not covered by insurance policies. Examples of speculative risks are investing in the stock market, placing bets on racehorses, and gambling. Static - Static risks are independent of changes to the economy and are more consistent over time. A static loss may be an unintended change in ownership due to theft, destruction of an asset or a result of human error. Particular - Particular risks are specific to individuals and are often managed through insurance. Pure - Pure risks present a potential for loss only, not gain. Pure risk is the type of risk that is insurable. Examples of pure risk include the possibility of financial loss caused from accident, illness, and death. It is true that not every pure risk is an insurable risk; however, insurance only covers pure risks. Nonfinancial - Nonfinancial risks are all the non-monetary situations that have a potential for loss. One example of a nonfinancial risk is a blind date. Dynamic - Dynamic risks are caused by a changing economy, and include changes in product price, purchasing trends and technology. Dynamic risks typically result in gain and societal advancement.

Home Service

Home service insurance is industrial insurance sold by home service or debit insurance companies. Face amounts are small, usually $1,000 to $5,000. Premiums are paid weekly or monthly.

Common Situations for Errors & Omissions

If a producer is prone to creating a situation that misrepresents the proposed coverage while selling the policy to an individual, the individual may take legal action for such misrepresentation. Producers should document all conversations with the applicant whether over the phone, email, fax or in person. A producer can protect himself by purchasing Errors and Omissions (E&O) or professional liability insurance coverage. The insurance company will defend the producer against lawsuits the policy covers, regardless of whether the suits are unwarranted or for just cause.

Risk Purchasing Groups

In contrast to risk retention groups, risk purchasing groups do not retain risk. Risk purchasing groups buy group liability insurance from an outside insurer or from a risk retention group. Risk purchasing groups do not act as insurers, underwrite coverage, nor require members to provide capital. Risk purchasing groups must be registered in each state they offer insurance. An example of a risk purchasing group is the Special Markets Purchasing Group, Inc.

Indemnity

Indemnity Insurance is defined as insurance that compensates the beneficiaries of the policies for their actual economic losses, up to the limiting amount of the insurance policy. The term indemnity means, "to make whole."

Fair Credit Reporting Act

Law that grants consumers to the right to know who requests to view their credit report over the past year and ensures accuracy of information.

Define Liability Risk

Liability risks are the potential for financial loss caused by injury to other people and damage or destruction to others' property. The United States legal system mandates that the person who caused the harm or damage be held as the responsible party. Liability risks can cause financial hardship for those who are assessed monetary fines or owe large amounts of money to the injured party. Casualty Insurance and Errors and Omissions (E&O) coverage are two examples of insurance that protect against liability risks.

Life and Health Insurance

Life and Health insurance protects against impairment to a person's greatest asset, their earning power, caused by injury, sickness, retirement or death.

Lloyd's Association / Lloyd's

Lloyd's Associations are loosely grouped as private insurers, even though they are not technically insurance companies. Lloyd's are better described as a market where individuals and groups gather to exchange insurance, much like stock exchanges provide a place to buy, sell and trade stocks. Lloyd's are corporations that advertise and market the financial services of an association of underwriters. Lloyd's do not underwrite coverage or issue polices. Members, who can be individuals (termed Names) or groups, form syndicates to underwrite and issue insurance coverage. One or more members can form syndicates. Each member can be thought of as one insurance company and provides the capital required to assume the risks undertaken. Each member is liable for the amount of risk assumed. One of England's primary sources of income is shipping and trading. Wealthy Englanders would insure ships and their cargo. People convened in bars and coffee houses to barter their insurance needs. The oldest and best known Lloyd's is Lloyd's of London. These unofficial places to exchange insurance later became formalized into Lloyd's Associations. The oldest and best known Lloyd's is Lloyd's of London. The majority of Lloyd's of London members are corporations, followed by international insurers and individual members comprising the smallest portion. Most of the business Lloyd's of London transacts is reinsurance, property and casualty risks. Lloyd's exist throughout the world. Patterned after Lloyd's of London, American Lloyd's Associations exist; however, without the stringent regulations imposed on Lloyd's of London, most American Lloyd's are prohibited in the United States. Most American Lloyd's are prohibited because of strict insurance regulations by the states.

For a Pure Risk to be insurable, they must meet 7 Conditions:

Loss must occur by chance or accident Insurance is intended to reduce the uncertainty of loss, not assume responsibility for inevitable losses. The loss must be the outcome of an unforeseen event. Put another way, the loss must have the potential of taking place or not taking place, but cannot be a guaranteed loss. Additionally, the insured must not be able to control whether or not the loss occurs. Insurance is intended to reduce the uncertainty of loss, not assume responsibility for inevitable losses. Loss is definite and measurable The loss must have a specific economic value, and it must be obvious that a loss has taken place. Insurance is provided based on the degree of economic loss, so the insurer must be able to place a dollar value on the loss. The insurer must have proof that the loss actually occurred. This is twofold: The loss must be an event that is difficult to falsify, and the insurer must receive proof that the loss occurred. Loss must be predictable The loss must occur with a degree of regularity so that the insurer can establish what premium is required to adequately cover the risk. Large number of similar units The law of large numbers requires that there are a large number of similar (homogenous) exposure units for each type of insurable risk. A large number of homogenous units help the insurer determine the predictability of losses and the economic impact of such losses. Insurers also use experience data, or information from previous losses paid, in order to predict future losses. Loss exposures must be chosen randomly Insurable risks must not be concentrated to a particular group or population such as groups based on gender, age, occupation, geographic locale, race, national origin or economic status. This is known as random selection. Losses that are guaranteed to occur in a particular group pose an undesirable situation for insurers referred to as adverse selection, or the tendency for less than average risks to seek insurance. In some cases, socially funded insurance intervenes when exposures in a group are not random. One example is flood insurance. Presumably, people who purchase flood insurance are those who know that they are at a higher risk. When a flood occurs in a particular geographic location, all people in that geographic vicinity are likely to be affected. The National Flood Insurance Program was established to deal with this insurability problem. Another example is Social Security, which provides a source of income to people who cannot earn their own income because of advanced age or disability. Loss must be significant, causing economic hardship The loss must be severe enough to warrant taking out an insurance policy. Insurance policies require the payment of premium in order to fund the cost of the risk. If the cost of the loss is less than the cost of the premium, then insurance is not necessary, and the loss could be paid for out-of-pocket. Loss must not be catastrophic The loss cannot be so severe that the insurer couldn't bear the cost of covering the loss. Additionally, the insurer bases loss on randomness and the law of averages. A large group of exposure units should not experience loss simultaneously. Extremes in loss experience should neutralize, so that loss experience is averaged. Catastrophic losses are caused by perils such as life-threatening illnesses and disease and war.

Federal government insurance for catastrophic risks includes:

National Flood Insurance, War Risk Insurance, and Federal Crop Insurance.

Can you insure any type of risk?

No. Only "Pure Risks." Insurance is designed to offset the financial damage caused by loss, but not to provide the insured with a profit. There are two primary types of risk: Speculative, and Pure. Speculative risks present a potential for loss or gain and are not covered by insurance policies. Pure risks present a potential for loss only. Pure risk is the only type of risk that is insurable.

Name the Classifications of Personal Risk

Personal risks are those that jeopardize an individual's greatest asset, their earning power. Personal risks are divided into four categories based on the peril, or cause of the potential loss. These include: - Premature death, - Sickness or accident, - Unemployment, and - Dependent old age. Life and health insurance and annuities protect against personal risks.

The 4 Types of Hazards:

Physical, Moral, Morale, and Legal

Pretext Interviews

Pretext interviews are interviews in which the interviewer assumes a false identity or refuses to disclose their true identity and interviews a person without disclosing the true purpose of the interview. A Pretext interview is forbidden by law except in cases where there is substantial evidence of fraud, criminal activity or misrepresentation.

Insurers can be grouped into two main types:

Private and Government. Private insurers offer insurance to people through the individual market. Government insurance redistributes incomes to help people afford costs associated with fundamental risks.

The main types of people involved in insurance sales:

Producers Producers are people who sell, solicit and negotiate insurance. This term encompasses agents and brokers. In some states, solicitors are licensed to work as insurance producers. Agents Agents are insurance producers who represent the insurer, not the insured. Life and health agents cannot bind insurance (commit insurers to provide coverage by a written or oral agreement); however, property and casualty agents can bind insurance. Brokers Brokers are insurance producers who represent the insured, not the insurer. Brokers work for several different insurers. Brokers' duties are similar to agents' in soliciting coverage, collecting applications and initial premiums, and delivering policies; however, brokers cannot bind insurance. Solicitors Solicitors are licensed salespeople who work for an agent or broker. Solicitors perform the duties of brokers; however, like brokers, they cannot bind coverage. Consultants Consultants provide insurance advice to insureds for a fee. Consultants work for insureds, not insurers.

Property Insurance

Property insurance protects against the risk of damage and destruction to all types of property.

Define Property Risk

Property risks are the potential for loss caused by destruction or theft of property. Losses associated with property risk include property loss and loss of income generated by a property. Property insurance protects against property risks.

Name the Classifications of "Pure Risks"

Pure risks are classified into the following categories: Personal risks, Property risks, Liability risks, and Risks due to the failure of others.

Risk Pooling

Risk pooling spreads risk by sharing the possibility of loss over a large number of people. It transfers risk from an individual to a group. Combining similar losses from many people so the average loss over the entire group remains relatively constant.

Risk Retention Group (RRG)

Risk retention groups are limited liability companies or member-owned corporations that collectively assume and spread their members' liability risks through self-insurance. All members of a risk retention group must be employed in similar types of businesses so that they have similar liability exposures. Risk retention groups must be licensed in at least one state or district. Upon licensure, risk retention groups act as insurers, where members underwrite coverage, retain their own risk, and issue insurance policies to their members throughout the United States at attractive rates. Risk retention groups require members to provide capital to fund the risk. This encourages each member to avoid excessive and unnecessary claims. Most risk retention groups purchase reinsurance.

Define "Risks due to the failure of others"

Risks due to the failure of others are the potential for financial loss caused by individuals who agree to perform a service or follow through on an agreement and fail to complete the task. For example, a disc jockey that fails to show up at a wedding reception. Liability and cancellation insurance cover these risks.

There are several types of government insurance. In terms of life and health insurance, most people are familiar with...

Social Security, Medicare, and Medicaid. Social Security, also known as OASDI (Old Age, Survivors' and Disability Insurance), provides disability income, survivor benefits and retirement benefits. Medicare is part of the Social Security program, and provides medical benefits to qualifying people age 65 and older. Another medical insurance program subsidized by both the federal and state governments is Medicaid, which provides health care to impoverished people. The government also provides military, federal and state employees with a variety of life and health insurance programs including: Servicemen's Group Life Insurance, CHAMPUS, and TRICARE.

Penalties for violating the Privacy Act

The Commissioner of each state has the power to investigate insurers to verify compliance with the Privacy Act. The Commissioner may order a hearing if he believes a person or insurer is in violation of the Privacy Act, and issue a cease and desist order if that person or insurer is found to be in violation. The Commissioner may issue a maximum fine of $10,000 for each occurrence in which a person or insurer continues to violate the Privacy Act after a cease and desist order has been issued. Repetitive violations that indicate a general business practice are punishable by a fine of up to $50,000 per violation. Any person who obtains personal or private information without good reason is subject to one year in jail and a maximum fine of $10,000.

Gramm-Leach-Bliley Act

The Financial Services Modernization Act was passed in 1999 with the purpose of allowing financial entities, such as banks, to merge and create greater competition. This law repealed the Glass-Steagall Act, giving insurers the ability to merge with banks, and either financial institution to perform the duties of both. Regardless, its respective state insurance department regulates any entity acting as an insurer. The GLBA defines a consumer as an individual who obtains financial products or services that are to be used primarily for personal, family, or household purposes from a financial institution. Customer is a consumer who has an ongoing relationship with a financial institution. BOTTOM LINE: State insurance departments regulate any entity selling insurance.

Peril

The cause of loss, e.g., premature death, dependency during old age, an accident, sickness. Perils are the specific named events covered by an insurance policy. Some policies only cover accidents. Some policies cover both accidents and sickness.

The Law of Large Numbers

The larger the group, the easier it is to predict the number of future losses over a certain period of time. To remain financially stable, insurance companies must have an idea of how many losses will occur in a given year so that adequate funds can be set aside to cover claims. Instead of attempting to predict who will undergo loss, insurance companies use the law of large numbers to estimate how many losses will occur in a certain group of people over a certain period of time. Actuaries collect and analyze risk data, determine the rate people will die (mortality), the rate people will get sick (morbidity) and then group individuals by similar risks to get the best data.

Claim

To benefit from an insurance contract, the insured must notify the insurance company of a loss. By notifying the insurance company, the insured is demanding payment of the benefits provided by the policy; this is the definition of a claim.

The Privacy Act of 1974

a law that gives citizens access to the government's files on them. was enacted to establish a code of fair information practices dictating how personally identifiable information of individuals is handled by federal agencies, and prevent invasions of privacy. The Privacy Act mandates federal agencies to provide the public with a notice of their systems of records, or a federal agency's set of records in which individual's information is identified by name or another form of identifier, such as a Social Security number. The Privacy Act forbids disclosure of information from a system of records without the individual's written consent. However, if the disclosure is required based on one of the 12 legal exemptions, the individual's written consent is not required. The Privacy Act gives individuals a way of retrieving their records and correcting inaccuracies in these records.

When it comes to consumer reports the insurance _______________ (can/cannot) tell the client what was in the report or why the client has been denied.

the insurance company cannot tell the client what was in the report or why the client has been denied.